Bitcoin's value booms, leading to surge in crypto miners

Bitcoin's value booms, leading to surge in crypto miners

Bitcoin's value soared over the weekend, resulting in a surge in crypto miners and related suppliers on Monday.

Bitfarms rose by at least 15% early in trading, Hut 8 Mining surged 14.4%, Marathon Digital Holdings rose 14%, and Riot Platforms surged 17.4%. Some of those gains were given back quickly, though, at 1:15 p.m. ET shares edged up 2.8%, 2.6%, 3.1%, and 7.8% on the Nasdaq Stock Market.

We're seeing that play out today, with Bitcoin miners and companies making chips and products for mining a leveraged play on the underlying cryptocurrency. Bitcoin is up about $3.5% from market close on Friday to the time of writing, yet these stocks have surged significantly more than that.

The leveraged nature comes from their underlying operations. For these companies, the cost of mining or making chips is relatively constant, with earnings being influenced by the value of Bitcoin. That leads to massive upside when revenue goes up, which is why we see jumps like today.

What's interesting about Bitcoin is that it happened after the U.S. Congress agreed to a deal that would avert a government shutdown. In reality, a shutdown or debt ceiling breach has been negative for Bitcoin, and the cryptocurrency's value has grown as agreements are reached.

We are seeing a slow opening of the crypto trading market for exchange-traded funds in related news. Some Ethereum ETFs have been made available by the SEC, which could lead to more crypto products from Bitcoin to smaller cryptocurrencies. The market is moving towards more regulatory clarification and more available products for cryptocurrency investors and traders.

It's not clear that the bounce in Bitcoin's value over the weekend will last, because it's very speculative. The cryptocurrency has already returned a portion of its gains and is currently trading at around $28,070. History tells us that the averted shutdown-related pop will be given back over time.

Congress will be the most important answers to the future of crypto, answering regulatory questions about the use of Bitcoin and other cryptocurrencies for payments and asset ownership. In recent weeks, we have seen Singapore move ahead with a more open regulatory system, and other countries are doing the same. The pressure on the U.S. to respond to regulatory questions is likely to increase in the foreseeable future.

The crypto industry is moving in the right direction as it becomes more of an infrastructure layer in the worldwide payment system, rather than a speculative asset. But that transition will take a significant amount of time. Bitcoin's miners will likely remain unstable as Bitcoin's price changes, but if crypto continues to take more strides towards payment usage, that would be good news for Bitcoin and miners.