There was a lot of movement in cryptocurrency-related stocks on Thursday. Unfortunately for shareholders of cryptocurrency mining companies, the action in this sector has been a massive sell-off.
Many of them really took it on the chin that day. Marathon Digital Holdings (Mara -12.60%), for example, saw its stock price close down nearly 13%. The worst for wear were the peers Riot pads (riot -15.82%), with a decrease of approximately 16%. The drop between the two was much smaller PetFarms (bitf -13.33%); Its shares suffered a decline of more than 13%.
New crypto securities have been very popular
The main reason was the new location of the market Bitcoin (BTC -1.34%) Exchange-traded funds (ETFs), which began trading Thursday. Investors piled into these new instruments; All told, $4.6 billion worth of hands had changed hands as of that afternoon. We can reasonably infer that at least some of these trading parties pulled money out of Bitcoin mining stocks in a reallocation move.
This wasn’t just about modernity. Spot Bitcoin ETFs already have a significant presence on the scene, with all 11 funds under review by the Securities and Exchange Commission (SEC) approved for trading yesterday. So not only is it new, different and attractive, it also gives investors a lot of options.
Crypto bulls have focused sharply on spot cryptocurrency ETFs since they were hardly a glimmer in the eyes of the companies that proposed them. Speculation has been rife that at least a few of them will be approved early this year. Many investors and observers were surprised that all applicants got the green light for their new securities; The general expectation was that at least several of them would not win the regulatory body’s nod.
Another factor in the move away from mining stocks on Thursday is that they are all largely (or entirely) focused on creating new bitcoin. So far, only spot Bitcoin ETFs have hit the market; No company has yet created and received approval for spot ETFs covering one or more altcoins. So the Bitcoin world will likely focus on the shiny new toy for some time before it becomes a standard type of investment in cryptocurrencies.
Unjustly punished
I feel like this opens up some opportunities to profit in Bitcoin mining stocks, since the value of the currency they all rely on is already rising (at decent, if not amazing rates). There were no special developments for the miners to take the defeat they suffered on Thursday. So declines of more than 10% are unjustified and do not appear sustainable.
However, any investment related to cryptocurrencies carries above average risks, as even the most popular coins and tokens can be highly volatile. As always, caution is the name of the game here.