Bitcoin mining stocks are crawling back, but gains could be brief

Bitcoin mining stocks bounced back in Wednesday’s pre-market session, helped by the recent BTC rebound. 

Riot Platforms shares rose by over 1%, while Marathon Digital, the biggest miner in the industry, rose by 1.65%. Other companies like CleanSpark (CLSK), Iris Energy (IREN), Core Scientific (CORZ), and TeraWulf (WULF) rose by over 1.5%.

Bitcoin price is rebounding

These stocks rose because of the ongoing Bitcoin price action. After bottoming at $53,520 last Friday, Bitcoin rose to over $59,390 on Wednesday. 

This rebound happened as the industry sent mixed signals. On the one hand, the German government continued moving Bitcoins to exchanges ahead of an eventual sell-off. It deposited 5,013 more coins to Kraken, Coinbase, and Cumberland on Wednesday and now has over 18,000 coins remaining.

At the same time, wallets associated with Mt.Gox have started moving coins, which will lead to more supply on exchanges.

On the positive side, there are signs that Bitcoin ETFs are seeing inflows. Nine ETFs added 4,601 coins on Tuesday, worth over $263 million. Some of the best performers were funds by Blackrock, Fidelity, Ark Invest, and Bitwise.

Meanwhile, data by CryptoQuant shows that BitMEX had a big outflow of over 35,000 coins this week. The company’s data shows that such events are usually predictable signs that happen before a big Bitcoin price increase.

Bitcoin price also rose after Jerome Powell, the head of the Federal Reserve, said that the bank was willing to cut interest rates if inflation continues falling. The most recent data showed that the headline CPI and PCE numbers retreated in May.

Bitcoin mining stocks risks remain

Still, two key risks could affect Bitcoin mining stocks. First, recent data showed that most of them are producing fewer Bitcoins because of the halving event

Marathon Digital produced 590 coins in June, down by 40% from the same month in 2023 and down by 4% from the previous month. TeraWulf produced 136 coins in June after mining 144 coins in the previous month. Other companies like CleanSpark and Cipher Mining reported a drop in Bitcoin production.

Bitcoin price chart

Second, there is a risk that the ongoing Bitcoin recovery is part of a dead cat bounce, which happens when an asset in a downtrend experiences a brief rebound. That scenario is possible since the coin has formed a big double-top pattern, a popular reversal sign. 

Therefore, Bitcoin mining stocks will likely resume their downtrend if BTC price recovery falters. 

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