Crypto Mining Stocks: What's Going on With SOS, MARA and RIOT?

Time:2022-01-03 Source: 898 views Trending Copy share

Crypto mining stocks have been on one volatile ride of late. The volatility for this sector has unfortunately taken a negative turn.

Top crypto miners including SOS Limited (NYSE:SOS), Marathon Digital (NASDAQ:MARA) and Riot Blockchain (NASDAQ:RIOT) are all down precipitously. These miners dropped 5%, 11% and 9%, respectively, at the time of writing.

A series of regulatory headwinds have plagued this sector for some time. China has continued to crack down on crypto mining, first with a ban and then with subsequent enforcement actions. These crackdowns have spread to other jurisdictions, with the U.S. reportedly looking into crypto miners as well.

However, today, it doesn’t appear that regulatory headwinds are the cause of this sector-driven move. Let’s dive into what investors are watching closely today with crypto mining stocks.

Crypto Mining Stocks Sink Along with the Price of Bitcoin
As with any commodity producer or company that’s considered to be a price-taker, a drop in the underlying price of the good being produced generally isn’t a good thing. For SOS, Marathon and Riot, Bitcoin (CCC:BTC-USD) is the commodity in question.

Today, Bitcoin prices dropped significantly, on news that futures-linked liquidations in Bitcoin alone exceeded $94 million. There’s a tremendous amount of speculative leverage being used in crypto markets by traders. Accordingly, when spot prices drop, this leverage can amplify downside swings. For crypto miners dependent upon high Bitcoin prices, this is certainly not a good thing.

Bitcoin prices declined approximately 5% at the time of writing, with crypto miners seeing heavier losses. It appears the implicit leverage to Bitcoin prices crypto miners provide has led to this wider decline.

As the price of Bitcoin continues to fluctuate, crypto miners may see outsized volatility for some time. Accordingly, these stocks appear to also be getting caught up in a broad de-risking in markets today.

By Chris MacDonald, InvestorPlace Contributor

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