Bitcoin Rally Could Not Prevent Dip In Mining Stocks

Bitcoin mining stocks have experienced a significant decline, up to 27%, over the past three trading days despite the recent surge experienced by Bitcoin (BTC). According to Mitchell Askew, the lead analyst at Blockware Solutions, there have been two instances of a similar divergence in 2023, offering a favorable chance to invest in mining stocks at reduced prices.

Caution Advised

One analyst suggests this downturn may be due to unwarranted caution regarding the upcoming halving, implying it could present another attractive opportunity to acquire mining stocks at lower costs. Since February 27th, the two largest Bitcoin miners, Marathon Digital Holdings (MARA) and Riot Platforms (RIOT), have declined by 18.5% and 21.9%, respectively, according to data by Google Finance.

CleanSpark (CLSK) saw a substantial decrease of 27.5%, while TeraWulf (WULF) also experienced a decline of 25.4%. Various notable figures in the industry, like gold advocate Peter Schiff, have observed this trend, speculating whether the drop in Bitcoin mining stocks signals potential trouble for the flagship crypto. One cryptocurrency trader mentioned a shift in sentiment towards mining stocks as Bitcoin approached the $65,000 mark, indicating a cautious approach amid rising prices.

Looking Ahead

Mitchell Askew suggested that investors might be wary of investing in Bitcoin miners due to the looming halving event, which would reduce miner rewards by half. He emphasized that there have been two significant instances in the past year where both Bitcoin and mining stocks plummeted, presenting favorable opportunities to invest at lower prices.

According to Askew, these pullbacks are normal given the volatility of these assets and should be seen as opportunities rather than causes for concern. Looking ahead, Jaran Mellerud, one of the founders and chief mining strategists at Hashlabs Mining, believes the three to four months following the Bitcoin halving could be crucial for publicly-listed miners in the United States, speculating that some high-cost miners may relocate offshore to maintain profitability.

However, Askew disagrees, stating that it would be foolish to believe that the halving would render them unprofitable, as they have some of the lowest energy costs and have been investing in the latest hardware to prepare for the reduced block subsidy.