These Bitcoin-related stocks are plunging today, after impressive gains earlier this week

What happened

After impressive moves yesterday, the shares of various cryptocurrency miners are plunging today. As of 2:30 PM ET, shares of Riot Platforms (RIOT -8.93%), Cipher Mining (CIFR -12.41%)and CleanSpark (CLSK -11.33%) are down 9%, 10.7% and 11.3% respectively over the past 24 hours.

As I reported yesterday, crypto miners were heading in the opposite direction yesterday, with similar gains to the upside. Thus today’s move in these Bitcoin (BTC -3.49%) miners believe that these stocks have given up essentially all of their upside moves in yesterday’s session.

The price of Bitcoin has a lot to do with this move, and Bitcoin has lost about 3.3% in the last 24 hours, at the time of writing. However, other factors, such as Bitcoin’s hash rate (the computing power required to process blocks), suggest strength in the cryptomining sector, leading to optimistic views in this area in the medium term.

So what

Bitcoin mining is an inherently difficult sector to understand. Massive computing power is needed to solve complex mathematical problems, in an effort to validate transactions and secure the Bitcoin network. While a lot of data has been provided regarding the overall health of the Bitcoin network (which appears to be perfectly fine, according to recent data), how investors interpret this data can clearly change from day to day.

Today’s moves in these prominent crypto miners seem to be more related to Bitcoin’s price action than anything else. Right now, it is clearly a battle between bulls and bears to secure the $30,000 level. With Bitcoin moving roughly $1,000 lower since yesterday, a $29,250 price isn’t as enticing as one with a 3 in front. Thus, these stocks appear to remain highly correlated ways to play Bitcoin’s rises or falls, often rising or falling to a greater degree than the cryptocurrency itself.

What now

When it comes to crypto investing, I think there is a valid argument to be made for simply buying a given cryptocurrency, rather than trying to get fancy buying adjacent assets that may be more volatile. With respect to Bitcoin, I think this is the case. It’s up 80% this year, and many crypto miners are up even more. However, these higher volatility characteristics have also played out to the downside, meaning that when times are bad, they are really bad for this group of stocks. Investors just need to keep this in mind before diving into any of these high-momentum stocks right now.