Why Riot Platforms, Hut 8 Mining Corp and HIVE Blockchain technologies are volatile today

What happened

Several Bitcoin (BTC 0.01%) miners rallied this morning after a good weekend for Bitcoin, where the price of the world’s largest cryptocurrency topped $21,200.

Shares of the Chinese Bitcoin Miner Riot Platforms (RIOT -0.58%) 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 (COTTAGE 8.54%) traded as much as 19% higher today, but is now only trading around 8% higher, while shares on HIVE Blockchain Technologies (HIV 2.53%) was up approx. 14%, but is now only up approx. 4.5%.

So what

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

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

Bitcoin price data from YCharts

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

Then the big crypto exchange FTX declared bankruptcy and its founder and CEO Sam Bankman-Fried is believed to have engaged in extensive fraud, which eventually brought down the stock 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, which CoinDesk recently reported that it has liquidated $500 million in card games since Friday.

While cryptoanalysts don’t see a ton of fundamental factors behind the move, it’s not always easy to explain big moves in crypto.

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

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

What now

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

While I expect Bitcoin to be here for the long term, I’m not so sure that the crypto winter is over or that the market has fully put the problems of the FTX debacle behind it. Bitcoin and crypto may continue to struggle, although they should benefit if inflation continues to slow.

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