Why Riot Platforms, Hut 8 Mining Corp, and HIVE Blockchain Technologies Are Volatile Today

What happened

Several Bitcoin (BTC -0.09%) miners rose this morning after a good weekend for Bitcoin, in which the price of the world’s largest cryptocurrency topped $21,200.

Shares of the Chinese Bitcoin miner Riot Platforms (RIOT -0.08%) traded more than 10% higher earlier today. But as of 11:27 a.m. ET today, shares of Riot were down 2%.

Shares of Hut 8 Mining Corp (HUT 8.54%) traded as much as 19% higher today but now only trade about 8% higher, while shares of HIVE Blockchain Technologies (HIVE 3.05%) were up about 14% but now are only up about 4.5%.

So what

Riot, Hut 8, and HIVE Blockchain are all Bitcoin miners, meaning their business model involves trying to mine as many Bitcoin as possible in the most efficient manner.

There are operational differences at these companies, such as the hardware they use and the computing power they might have, but a big driver for all of these stocks will be the price of Bitcoin because it’s the asset they mine and hold. Although they’ve been more volatile, the direction of their stocks tends to move with Bitcoin.

Bitcoin Price data by YCharts

Recently, Bitcoin has been rallying thanks to cooling inflation and a weakening dollar. The token got crushed all year in 2022 because soaring levels of inflation caused the Federal Reserve to rapidly raise interest rates, making riskier assets like Bitcoin much less appealing.

Then the large crypto exchange FTX declared bankruptcy and its founder and CEO Sam Bankman-Fried is believed to have engaged in widespread fraud, which ultimately brought down the exchange. This really shook the faith of crypto investors.

The sudden and surprising rally seems to have caught many of the short sellers off guard, as CoinDesk recently reported that there have been $500 million of short bets liquidated since Friday.

While crypto analysts aren’t seeing a ton of fundamentals behind the move, it’s not always so easy to explain big moves in crypto.

“The minor breakout is a positive, but short-term overbought conditions have returned…so we think a neutral short-term bias is prudent,” said Katie Stockton of the research firm Fairlead Strategies, according to Barron’s. “If resistance near $21,500 is cleared, it would mark a more meaningful shift, suggesting the downtrend has lost hold while putting next resistance at the August high around $25,200.” 

Although I didn’t see a ton of company-specific news today, HIVE did announce the hiring of Aydin Kilic as the new president and CEO of the company. Kilic has been with the company since 2021 and helped oversee several expansion initiatives.

Now what

The crypto market is volatile even in the best of times, so I would expect the market to be even more volatile right now, with everything going on. 

While I do expect Bitcoin to be here for the long haul, I am not so sure that the crypto winter is over or that the market has fully put the issues from the FTX debacle behind it. Bitcoin and crypto could continue to struggle, although they should benefit if inflation continues to ease.

Because I think Bitcoin is here to stay, there is likely a future for these Bitcoin mining companies. However, I would simply rather hold Bitcoin itself than any of these stocks.