S&P Global Market Intelligence released data in September 2023 that showed that a number of Bitcoin mining stocks crashed hard in September 2023. Riot Platforms lost 17.8%, Cleanspark stock down 22.7%, and Marathon Digital's shares dropped 33.4%.
The sudden price drops are not unheard of within this volatile market sector, but they are often caused by a significant price drop in Bitcoin. The biggest cryptocurrency had a drop in trading last month, but only by 1.4%. Why did crypto miners take such dramatic haircuts for Bitcoin in a fairly quiet month?
The crypto mining industry was at a high, soaring sky-high at the start of September. Cleanspark trailed the larger miners, but was still up 142% on Aug. 31.
It didn't take much of a Bitcoin correction for these stocks to drive them lower. These significant drop rates were caused by the Gently pumping the brakes on Bitcoin's value growth.
In 2022, the crypto sector had turned sour, the market had seen a rapid rebound in early 2023, and the market lost steam again in recent weeks. This is a close match to the bullish and bearish signs in the global economy, which can't seem to get out of its inflation doldrums after two years of price-control government policies.
Investors are not convinced that high-risk investments will be profitable over the long term, especially if the company behind each stock must take new loans at steep interest rates to finance its operations.
This risk-averse attitude is bad news for Bitcoin and even worse for the crypto-mining experts. Cleaningspark, Riot, and Marathon are both effective in exaggerating Bitcoin's market trends, both daily and long-term.
The miners were not completely quiet last month, according to The Associated Press.
Although Bitcoin mining companies may look similar to the uninitiated, each runs its mining process on a distinctly different set of rules. Riot generates its own power and sells some in a separate revenue stream. Cleanspark bends over backward to ensure environmentally friendly mining operations, which may come in handy if the federal or state governmentimposes green energy requirements at some point. Marathon's vast scale is challenging, but it's also the only company in this trio with a substantial debt balance.
If you want to invest in one of these amplified Bitcoin vehicles during a slightly downturn, you could either do a deep dive and figure out which one's the best fit for your strategy, or grab a few shares of each to form a more diverse miner portfolio.
The potential for soaring gains, however, comes with a risk of massive risks, too. The sudden price drop in September was a reminder of that fact - in a steady Bitcoin environment, no less. Bitcoin mining stocks will not suit every investor's risk tolerance, making them unsuitable for investors.