Why Crypto Mining Stocks Like Canaan and TerraWulf Were on Fire Today

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What happened

Friday was a great day to invest in stocks of cryptocurrency mining companies. As a group, they forged ahead, with many advancing at double-digit rates.

Among those high flyers were Canaan (CAN 10.71%), TerraWulf (WULF 10.46%) and Cipher Mining (CIFR 10.68%), all of which posted gains of nearly 11% on the day. Just behind, Iris Energy (IREN 9.52%) with an increase of just under 10%. The quartet topped the interest-free 0.3% drop in the S&P 500 index.

So what

It’s not like the market suddenly woke up on Friday and discovered the wonders of Canaan, TerraWulf and their many mining peers. These stocks have been doing well for days due to a number of factors.

The first is the recent popularity of cryptocurrencies in general; this is essential for miners, because without a bullish crypto market, the value of what they produce obviously drops.

Fortunately, developments on this front have been largely positive. Traditional financial firms are clamoring to get into the crypto game, with several pushing to create exchange-traded funds (ETFs) for these assets. Among other efforts, leading exchange operator Cboe Global Markets is partnering with crypto market master Coinbase for a Bitcoin ETF.

These types of moves help legitimize cryptocurrencies in general, and Bitcoin in particular, as attractive assets to invest in.

Another factor is the state of the US macroeconomics. The latest figures from the government’s Bureau of Labor Statistics show job additions falling short of expectations. This alleviates fears of inflation warming through wage increases, and more subdued inflation could lead to interest rate caps.

Higher rates are hard on the cryptosphere because they make other assets more attractive (Bitcoin and its ilk, after all, are still considered high on the risk scale).

Finally, crypto miners usually release monthly operational updates for their investors. The June releases came in droves and quickly, and for the most part indicated that miners continue to push for growth. On Friday, for example, Iris Energy released its executive summary, revealing that the expansion of its mining facility in Texas is on track for completion in early 2024.

Now what

However, since cryptocurrencies are volatile investments by nature, there is always the risk of a sudden (and possibly sharp) downturn. Inflation could heat up again, prompting the Federal Reserve and other central banking authorities to raise interest rates. More scandals could arise in a cryptoverse that has already seen quite a few.

So those considering investing in miners should keep this in mind. If they remain optimistic about the future of digital money, however, mining stocks are a nifty and sideways method of getting involved in it.

Eric Volkman has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin, Cboe Global Markets and Coinbase Global. The Motley Fool has a disclosure policy.

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