Deepening Fears of U.S. Recession Lead to Drop in Crypto Mining Stocks -Breaking
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U.S. fears are growing more severe Crypto Mining Stocks Fall as A Recession- Along with cryptocurrencies, major crypto mining companies have seen their stock prices plummet.
- Due to rising energy prices, margins have been reduced.
- Marathon Digital Holdings has seen a fall in share returns.
Bloomberg reported Monday’s sharp fall in shares of crypto mining firms, which coincided with the New York Stock Exchange stock exchange.
The growing fears related to the tightening of the Federal Reserve’s monetary policy, which could lead the U.S. economy into a recession, have hit the crypto market hard.
Marathon Digital Holdings, the largest in the U.S. by market valuation, plunged 15% ($12.78), causing the company’s losses to increase to approximately 60%.
Yahoo Finance reported that shares of Core Scientific Inc. (NASDAQ:) Inc. plunged on the Nasdaq, ending the day with losses at 14.60% & 18.23%, respectively.
Mining shares have dropped alongside Bitcoin (BTC), as they fall from all-time highs. These crypto miners, which have high volumes of the world’s largest cryptocurrency on their balance sheets, have hit yearly lows.
“A Broad Environment of Risk Aversion”
Valkyrie Investments Chief Investment Officer Steven McClurg commented that “crypto and equity markets are largely selling off in tandem due to a broad risk-off environment where many investors are moving to cash.”
He added that “the correlation between the two asset classes has grown more pronounced in recent months because the number of publicly traded companies involved in blockchain and digital assets continues to grow, and is not likely to reverse course.”
CoinMarketCap reported that BTC fell 10.40% to $30,924 at 2:58 PM ET, following a weekend of selling of risk assets. Shares in technology companies similarly deteriorated in the wake of the Fed’s announcement that interest rates would be raised to try to bring runaway inflation under control.
The major indices saw sharp drops from November’s peak. The tech-heavy was down 25%, while the S&P 500 lost approximately 14%.
Bitcoin and other crypto markets have been hit hard by risk aversion. So far in 2022, the crypto market has displayed heavy volatile, with little sign of a return to last year’s highs.
In 2021, China’s ban on crypto mining caused the shares of crypto mining companies to hit record highs as competition was either entirely removed, or forced to relocate. However, recently these values have expereinced steep declines.
The Challenge is Twice as Big for Miners
Miners’ profit margins have also been deteriorating, but not just because of the bear market. Mining cryptocurrency is expensive due to sanctions placed on Russia in response to Ukraine’s invasion and rise in energy costs.
Others crypto-mining stocks like MicroStrategy (NASDAQ: Global) have been also trading at loss and market expectations for the next months are not optimistic.
In McClurg’s opinion, in the short term “the markets will continue to sell off through the summer, especially if rate hikes continue through the June and July FOMC meetings, before staging a potential rally through the end of the year in a pattern that has largely established itself over the past decade”.
He further underlined that “one thing to watch is the yield curve, as an inversion would be a harbinger of further selloff. Recession is imminent.”
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