Extreme volatility on mining company stocks
Extreme volatility on mining company stocks
Mining

Extreme volatility on mining company stocks

By Marco Cavicchioli - 20 Sep 2022

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The bear market is also affecting the publicly traded stocks of cryptocurrency mining companies. 

Stocks of mining companies are suffering from the “crypto winter”

The top two are Marathon Digital Holdings and Riot Blockchain, the only two to exceed $1 billion in market capitalization. 

The performance of Marathon (MARA)

Marathon is listed on the Nasdaq under the ticker MARA, and its performance has been falling sharply since November. Their trend closely resembles that of Bitcoin’s price, although it has rebounded interestingly in recent months. 

After the speculative bubble formed in 2021, with the price jumping from $2.4 in November 2020 to $83.5 in November 2021, the stock entered a long period of decline that ended in early July with the annual low of $5.2. 

Thus, although the 2021 low was more than double the price level at which the bubble began to form, the losses during 2022 were more than 90%

After a crash like this, which occurred in just over six and a half months, the price rebounded in a noteworthy way, as it nearly tripled before returning to about $10.

Interestingly, MARA’s volatility is higher than even that of BTC, but it should be kept in mind that this year’s market value of Marathon shares has certainly also been affected by the sharp rise in energy costs. This explains why MARA lost more than 90%, while BTC lost less than 80%. 

In addition, the +200% recorded between early July and mid-August could also be related in some way to the fact that inflation growth in the US has slowed down quite a bit in recent months. 

However, the current price is still 87% below the November highs, which is much lower than BTC’s -72%

It is difficult to say whether this is due to what happened in 2022, or what happened last year. On the other hand, during the bullrun of 2021, the price of BTC increased 245%, while the price of MARA shares increased 3,300%, so it is simply possible that the stock experienced a speculative bubble that was higher than the one that formed on the price of Bitcoin. 

The performance of Riot Blockchain (RIOT)

Riot Blockchain is also listed on the Nasdaq, with the ticker RIOT, and its path has been in some ways similar. 

The most important difference, however, is that it did not peak in November, but in February 2021, when it touched $80. 

In November 2020, before the bullrun began, its market value was $3.5, so in less than three months its price increased by more than 2,000%. So while in percentage terms RIOT’s growth was less than MARA’s, it was much faster. 

In November 2021, the price was about $45, which was 1,200% higher than a year earlier, but since then it has started to fall. 

The yearly low of 2022 was reached at the beginning of July, at about $4, which is a little higher than the starting price of November 2020, and since then it has first climbed back up to $10 and then climbed back down to about $6.5. 

So the long-term trends are similar, but with significant variations over the short and medium term, especially in terms of volatility. 

If we take as a reference the prices before the 2021 bullrun, MARA stock is now at +340%, RIOT stock at +91%, and BTC at +73%. 

In other words, thanks to the 2021 bullrun, MARA and RIOT have performed better than BTC, with Marathon Digital more than tripling Riot Blockchain. 

However, taking as reference the 2022 lows touched in early July, MARA is now at +102%, RIOT at +59%, while BTC is only at +4%. 

It is not necessarily the case that the difference lies only in a different degree of volatility due to a greater swelling of the 2021 speculative bubble, and indeed it is possible that the stock price of mining companies is also heavily impacted by concerns about rising energy costs. 

Mining farms around the world

Extending the picture to the multitude of other stocks that are involved in cryptocurrency mining shows that the difficulties of recent days are widespread. However, there are exceptions, even significant ones, with, for example, BIT Mining, Argo Blockchain UK, SAI.TECH, and Bit Digital all posting gains of more than 5% yesterday

Indeed, the landscape is more diverse than is commonly believed, despite being dominated by the two aforementioned giants. It must be said that although the US is currently the single country in the world that mines the most, there are also other countries with major mining companies, primarily Canada. 

So while the top players in this market move in a similar fashion, influenced directly by the trend in the crypto markets, there are also seemingly smaller players that manage to move against the trend. 

The general trend, as a whole, is basically that of MANA and RIOT, but there are exceptions, often related to local contexts or individual initiatives that somehow manage to stand out. 

In addition, the various news affecting individual companies can have an impact on the value of their shares, so the resulting picture is even more volatile than it already seemed before. 

On the other hand, given the close connection of this activity with the crypto markets, it is absolutely impossible for there not to be high volatility on the share prices of crypto mining companies. In such a complex, nervous, and evolving picture as the current one, it is not even all that surprising that the volatility of the prices of these stocks eventually turns out to be greater than the volatility on the price of Bitcoin

However, it is necessary to remember that greater volatility also inherently means greater risks for investors and speculators, as the landscape is so complex that it is impossible to follow all the news and trends of all the listed companies that are involved in mining. Therefore, the opportunities seem to be definitely attractive, but the actual operation turns out to be very difficult and risky, probably suitable mainly for trading professionals rather than classic retail investors.

Marco Cavicchioli

Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded ilBitcoin.news and the Facebook group" Bitcoin Italia (open and without scam) ".

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