Why shares of Riot Platforms, Hut 8 Mining and Bitfarms are falling today

What happened

Stocks on several Bitcoin (BTC -2.68%) mining companies fell today along with the price of Bitcoin, which has fallen about 3.3% since late yesterday afternoon and is now trading around $29,500.

Shares of Riot Platforms (RIOT -5.16%) traded about 4.5% lower as of 1:30 PM ET today, paring some of the losses from earlier when it had been down about 10%.

Meanwhile, shares in the Canadian Bitcoin mining companies Cabin 8 Mining (COTTAGE -7.98%) and Bit farms (BITF -3.86%) traded around 7.7% and 3.2% lower respectively. Both stocks had also fallen more than 10% earlier today.

So what

Because Riot, Hut 8 and Bitfarms all mine and hold Bitcoin, the move to the world’s largest cryptocurrency appears to be one of the main drivers affecting their share prices as well.

Image source: Getty Images.

One possible factor hurting Bitcoin today is that the US Dollar Index, which looks at the strength of the dollar against other currencies, moved higher today. Because Bitcoin was created as an alternative to the mainstream financial system, it tends to have an inverse relationship with the dollar.

The dollar appeared to move higher on data today from the Empire State Manufacturing Index, which showed business activity in New York increased for the first time in five months. This supports the idea that the economy remains healthy and could lead the Federal Reserve to raise interest rates again at its May meeting, as the agency continues to battle inflation. Rising interest rates have not been good for Bitcoin over the past year.

There has also been talk recently that interest rates may still end up staying higher for longer. That despite the chaos in the banking sector which had recently led many to believe that a recession would be here sooner than expected, potentially leading to interest rate cuts. Bitcoin also rallied as more banks collapsed in March, but so far major banks have recently reported strong earnings to kick off earnings season.

For the most part, however, analysts seemed to shake off the fall in Bitcoin today after what has been an incredible rally this year that has seen the price of the token rise by close to 77.5%.

“Traders should be prepared that the $30,000 mark for the first cryptocurrency could act as solid resistance after it was stiff support in 2021,” said FxPro analyst Alex Kuptsikevich, according to Barron’s. “That said, technically Bitcoin has already proven the end of the bear market by hedging above key moving averages and steadily pulling back from the bottom.”

What now

Given the run Bitcoin has been on, it wouldn’t be unusual for the cryptocurrency to take a breather every now and then. What is much less clear is how certain macroeconomic factors such as interest rates and the exchange rate of the dollar will play out, which could definitely affect Bitcoin and thus crypto-related stocks.

Ultimately, I think it’s worth it to have some exposure to Bitcoin in your portfolio, and I think Bitcoin will be here for the long term. The Bitcoin miners will probably benefit from the price of the asset they mine and hold going up, but I prefer to just own Bitcoin myself.