Bitcoin Mining Stocks Rise with Broader Market as Traders See Less Aggressive Fed

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Shares of publicly traded Bitcoin (BTC) miners surged on Jan. 9 as traders crowded the stock markets amid growing bets that the U.S. Federal Reserve would soon be able to ease its aggressive fight against inflation.

Bitcoin miners Riot Blockchain (RIOT), Hut8 (HUT), Bitfarms (BITF), Marathon Digital Holdings (MARA) and others saw double-digit percentage gains in intraday trading.

The rally coincided with a broad rally in equity markets, with the large-cap S&P 500 index rising 1% and the tech-focused Nasdaq climbing 2% before paring gains.

Markets rallied ahead of a much-anticipated US Consumer Price Index report later this week that is expected to show continued moderation in cost pressures. On January 7, data from the Labor Department showed that job creation and wage growth slowed in December, suggesting that the Federal Reserve’s rate hike campaign was having the intended effects.

Swap contracts showed traders now expect the effective federal funds rate to peak below 5%, up from 5.06% after Friday’s nonfarm payrolls report, according to Bloomberg. Fed Funds futures prices, meanwhile, suggest traders expect less aggressive rate hikes in the months ahead.

Related: BTC Price 3-Week Highs Welcome US CPI 5 Things To Know About Bitcoin This Week

Along with generally favorable market conditions, the rally in Bitcoin mining stocks can also be attributed to short hedging in a low liquidity market. Short hedging is often responsible for the early stages of a rally, as traders correct their positions by buying an asset after selling it earlier.

$BTC miners ripping today.

Short covering an illiquid market. pic.twitter.com/mwSwIB7K23

— Dylan LeClair (@DylanLeClair_) January 9, 2023

With bitcoin prices dropping 75% peak to peak and several crypto companies going bankrupt, the contagion has finally started to spread to the mining sector. In December, Core Scientific, one of the largest BTC miners in terms of computing power, filed for Chapter 11 bankruptcy in Texas. That same month, mining company Greenridge received a $74 million restructuring lifeline from New York Digital Investment Group.

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