Why Crypto Mining Stocks Jumped Today
Share prices of crypto mining companies rebounded sharply on Wednesday after President Biden issued an executive order relating to digital assets. This order could bring sweeping regulation to the crypto industry, but it is actually seen as a good thing for cryptocurrencies.
Some of the biggest movers on Wednesday were crypto-related businesses. At various times during the trading session, Canaan (NASDAQ:CAN) increased by 13.2%, Hut 8 Mining (NASDAQ:HUT) increased by 13.8%, HIVE Blockchain Technologies (NASDAQ: hive) increased by 11.6%, Bit Digital (NASDAQ: BTBT) increased by 13.1%, and Riot Blockchain (NASDAQ: RIOT) increased by 13.8%. These stocks did not maintain their peak prices, but were all still up sharply when the market closed.
President Biden’s executive order essentially asks most government agencies to outline opportunities and risks for digital assets. This includes asking the Federal Reserve to review central bank digital currencies (CBDCs), cross-border transactions, and digital asset market innovation.
The tone of the document was actually positive for cryptocurrencies and digital assets, which should be good for everyone from cryptocurrency holders to Web 3.0 developers. It could also mean that miners will have stable rules imposed on them, rather than being constantly threatened by inconsistent regulations.
The crypto industry has been asking Congress and regulators to set rules for the industry for years, but this is Washington’s first big step in that direction. It will take another six months before we hear what regulators recommend, but it could lay the groundwork for further innovation, including in mining.
An executive order to study cryptocurrency and digital assets has been coming for months, but this is the first concrete word we’ve gotten. Investors generally see this as support for the industry and that’s why we saw cryptocurrencies rise more than 10% at the start of trading on Wednesday.
Despite the fact that we won’t know what rules will be established for cryptocurrencies or their miners for months or even years, I see the United States as increasingly supportive of the crypto industry. Cities and states are trying to attract developers, and the federal government seems to be following suit. This is bullish for the industry in the long run.
As bullish as I consider Wednesday’s news, the impact here will be long-term in nature, so the immediate price spike may not last. Cryptocurrencies continue to be volatile assets, and miners depend on both crypto prices for income and value, as most hold significant amounts of tokens on their balance sheets. In short, be careful not to assume that this will drive crypto miners higher in the short term. This pop could fade quickly.
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