Bitcoin rose by 4% today, but these 3 stocks that are next to Bitcoin rose much higher

What happened

Starting at. 13.00 ET today, Bitcoin (BTC 6.79%) leads the march in the crypto sector upwards, and has risen 4.6% higher in the last 24 hours. This move is a continuation of some strong results for the world’s largest cryptocurrency this week, which has gone from under $ 20,000 seven days ago to breaking the $ 23,000 mark in early afternoon trading today.

Aside from the obvious effects Bitcoin’s move has had on other tokens, crypto-affiliated companies are also seeing a huge upside today. Specifically, Bitcoin miners Bitfarmer (BITF 14.40%) and Cabin 8 Mining (COTTAGE 11.43%) has strengthened by 16% and 10% respectively from yesterday’s end. And Bitcoin Mining Equipment Company Canaan (CAN 8.19%) has also caught a bid today, up 7.6% from yesterday’s closing.

So what

The price of Bitcoin is generally the “gold standard” in the crypto sector, as other token prices are indicated. Outside of US dollars, investors often want to know how much Bitcoin it will cost to acquire another token. Therefore, Bitcoin is often thought of as an exchange unit for most investors in this realm.

However, for crypto-adjacent companies such as Bitcoin mining, the BTC-USD exchange rate is even more important. When the price of Bitcoin rises against the US dollar (becomes more valuable), the mining income companies obviously receive increases. However, with many mining companies having debt on the balance sheet in dollars, an increasing spread in the exchange rate provides an opportunity for investors to have even more influence on the rise in the price of Bitcoin.

Therefore, when the market is up, miners like Bitfarms and Hut 8 will often see much more volatile movements higher. The opposite is also true, which has been very negative for these companies in this rather disgusting bear market.

What now

From here, Bitcoin miners and companies supplying mining equipment to this sector are likely to be seen as higher-power tools for traders to play the price of Bitcoin. Given the fact that these shares are listed on the stock exchange, it is not necessary for investors to set up a wallet or join a stock exchange. Rather, anyone with a broker account can participate in the fluctuations in the crypto market through trading in Bitcoin-adjacent stocks.

Aside from traders, long-term investors who are positive about the outlook for Bitcoin can take a look at some depressed crypto miners at these levels. It is actually important to keep today’s rally in context. Despite an increase of 16% and 10% respectively from yesterday’s end, Bitfarms and Hut 8 are still lower than 80% from their 52-week highs. Thus, it can be argued that such a rally may only just be underway, if Bitcoin were to continue to move higher from here.

That said, like any crypto-related investment, higher volatility means higher risk of capital loss over time. Investors who bought Bitcoin or these Bitcoin-adjacent stocks near the top can confirm how painful a sale can be. Thus, this sector is best reserved for investors with a long-term investment time horizon and a higher risk tolerance threshold.