Bitcoin (CCC:BTC-USD) mining stocks are suffering steep losses today due to a string of bad news, including growing threats to regulate the cryptocurrency sector, and the price of Bitcoin falling below $40,000 for the first time since last August.
Shares of cryptocurrency miners Riot Blockchain (NASDAQ:RIOT), Marathon Digital (NASDAQ:MARA) and Greenidge Generation (NASDAQ:GREE) are each down nearly 10% today, mirroring the decline in the price of Bitcoin. The world’s largest cryptocurrency is currently trading at just over $38,000 per coin.
At the same time, regulators in the U.S. and Europe have renewed calls to regulate the cryptocurrency sector, with some pushing to ban energy-intensive proof-of-work Bitcoin mining operations.
What Happened With Bitcoin Mining Stocks
Bitcoin’s price is falling with the entire cryptocurrency sector. The price of Ethereum (CCC:ETH-USD), the second-biggest cryptocurrency, also fell, combining with Bitcoin to wipe nearly $150 billion from the broader cryptocurrency market on Thursday night. The declines in cryptocurrencies follow Wall Street losses this week. The Nasdaq has fallen almost 5% this week and is down nearly 12% so far in January, putting it in correction territory. The benchmark S&P 500 is in its third consecutive week of losses.
The mounting losses come as U.S. Securities and Exchange Commissioner Gary Gensler renewed his threats to regulate the cryptocurrency sector during a Congressional hearing. Specifically, Gensler said that he hopes to bring in cryptocurrency exchange regulations later this year. Earlier this week, the European Securities and Markets Authority (ESMA) called for a ban on energy intensive “proof-of-work” cryptocurrency mining. The regulator says that the European Union should push the crypto industry toward the less energy-intensive “proof-of-stake” proofing process.
Why It Matters
The negative news and price declines in cryptocurrencies are having a negative impact on companies that specialize in Bitcoin mining. The price of Bitcoin has fallen sharply since last November, dropping more than 40% from a record high of close to $69,000. The stocks of Bitcoin mining companies tend to move in tandem with the price of BTC. RIOT stock is down 40% in the past six months, while GREE stock has declined 67% in the same period.
The threat of enhanced regulations or bans on cryptocurrency mining is only serving to further depress the share prices of these companies.
Going forward, it remains to be seen where the price of Bitcoin and other cryptocurrencies will end up. While some bullish analysts maintain $100,000 price targets on BTC-USD, bears forecast the price falling below $30,000 in coming months. Investors should also note that plans by the Federal Reserve to hike interest rates this year are pressuring Bitcoin.
What’s Next
Bitcoin mining stocks are likely to continue trending lower along with the entire cryptocurrency market. Any concrete action on the regulatory front is likely to send shares of companies such as Riot Blockchain, Marathon and Greenidge Generation even lower. Given the current slump in cryptocurrency prices and the ongoing volatility in the sector, investors may want to avoid crypto mining stocks for now. Let the dust settle before allocating capital to these names.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
