Why Crypto Mining Stocks Tumbled Today

The two asset classes that were punished harshly at times on Monday were cryptocurrencies and tech stocks. In many ways, cryptos and related assets were punished more harshly, with many investments seeing their prices fall sharply throughout the day.

While the degree of pain varied, crypto mining stocks generally fell into negative territory throughout the trading session. Cleanspark (NASDAQ:CLSK) was one of the top candidates to bottom, with its share price down nearly 10% by market close. Cipher Mining (NASDAQ:CIFR) also ended the day on a sour note, down nearly 7%, while Marathon Digital Holdings (NASDAQ:MARA) escaped the worst with a 1.4% loss.

Carrying a load across the sea

Crypto miners are tightly tied to the performance of the assets they mine, so if coins and tokens are on fire, you can be sure they’ll take some of the burn as well. Investors were actively selling all manner of crypto on Monday, with perennial bellwether Bitcoin down more than 7% in early evening trading.

As with tech stocks and, in many ways, the broader stock market, one of the immediate triggers of the sell-off was the Bank of Japan’s hike in its key interest rate last Wednesday. Because these were so subtle, even a gradual increase (in this case, from 0% to 0.1% to around 0.25%) was bound to have an impact on the yen. Unfortunately for the crypto market, the yen carry trade (explained here ) led to a sharp pullback in that market.

Compounding is a long-tailed pullback in crypto. It was an asset class that many investors were eager to get into at the start of the year, as new spot Bitcoin exchange-traded funds (ETFs) created excitement around the No. 1 coin. That momentum carried the crypto market higher for several months. But the dullness created by the Bitcoin halving in April dampened the enthusiasm, which has yet to fully recover.

Is there good news coming?

Bitcoin is currently trading at just under $55,000 per coin, a far cry from the $70,000-plus levels it had surged past just before the halving.

So, these assets and related assets like crypto miners could be poised to rally before long. The yen carry trade effect should fade quickly as yen movers adjust their positions in coins and tokens, while it looks increasingly likely that the Federal Reserve will cut its key interest rate and do so soon.

Rate cuts are a balm for crypto investors because they increase market appetite for assets considered risky, such as cryptocurrencies and the companies that issue them.

The story continues

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Eric Volkman has positions in Bitcoin. The Motley Fool has positions in Bitcoin and recommends Bitcoin. The Motley Fool has a disclosure policy.

The article Why Crypto Mining Stocks Dropped Today was originally published by The Motley Fool