After the bitcoin mining stocks Marathon Digital (NASDAQ:MARA) and CleanSpark (NASDAQ:CLSK) posted quarterly results that were lower-than-expected earlier this week, the stocks of both companies surged in trading on Wednesday afternoon. Marathon Digital’s stock increased by 18%, while CleanSpark’s stock increased by 26%. The gains come against the backdrop of continued growth in bitcoin, which has increased by 3.7% to $23.9K.
Both of these bitcoin mining stocks are related to renewable sources of energy. For powering its mining activities, CleanSpark uses low-carbon energy sources such as wind, solar, nuclear, and hydro. After receiving confirmation that its wind farm qualified for tax exemption, the power generator owned by Marathon Digital began supplying electricity to miners in Texas.
CleanSpark shares surged higher on Tuesday even though the company’s fiscal Q3 top and bottom lines fell short of expectations from Wall Street. The company announced the purchase of a new facility and the company’s intention to sell its energy business at the same time.
Other Bitcoin Mining Stocks Soared
Bit Digital (NASDAQ:BTBT), which also mines bitcoin and focuses on environmentally friendly power sources, had a 15% increase in its stock price. The company announced on Monday that its bitcoin output in July more than doubled compared to the previous month’s total.
Shares of Greenidge Generation Holdings (NASDAQ:GREE), a company that pledges to run its data centers in a manner that is entirely free of carbon emissions, increased by 13%.
Inflation Is Cooling Down
As a whole, Bitcoin mining stocks are having a nice day today as investors feel more at ease taking on risks due to the consumer inflation slowing down in July from its rapid pace in June.
Contrary to expectations of +8.7% and +9.1%, the consumer price index increased +8.5% year-over-year in July. Recent peak energy (oil, gas, and diesel) price declines played a significant role in the movement. When volatile food and energy costs are excluded, CPI rose +5.9% year-over-year in July compared to +6.1% anticipated and +5.9% previously.
According to GlobalBlock analyst Marcus Sotiriou, “Inflation remains painfully high, but the worst appears behind us. Inflation should moderate in coming months and return to the Fed’s inflation target by spring ‘24. Of course, there are many threats to this inflation optimism, but today is a good day to be an inflation optimist.”
Equities also surged, with the Dow rising 1.6%, the S&P 500 gaining 1.8%, and the Nasdaq gaining 2.3%. The camp that claims bitcoin is an inflation hedge has been relatively quiet while consumer prices remain close to 40-year highs, even though bitcoin is down about 65% from its top of $68.9K in November. On the other hand, because of its positive historical correlation with the stock market, some people use bitcoin as a proxy for risk tolerance and general attitude
“Although inflation is still excruciatingly high, the worst appears to be over. By spring of 24th, inflation should have returned to the Fed’s target range after easing in the upcoming months. The risks to this inflation optimism are numerous, but today is a good day to be an inflation optimist,” Mark Zandi, chief economist at Moody’s Analytics, posted on Twitter.
The markets have already factored in lower Fed rate increases at the upcoming meeting on September 21. According to the CME’s FedWatch tool, traders expect a 50-basis-point increase with a 60.5% probability and a 39.5% possibility of a 75-basis-point increase. The probabilities were 32% for 50 bps and 68% for 75 bps the day before.
Although markets celebrate after the CPI report, keep in mind that “the Fed will need to see a series of numbers showing inflation is declining before it pivots. The debate for Sept meeting is likely to be 50 vs 75. We have plenty of data between now and then,” stated in a tweet, Kathy Jones, chief fixed income strategist for the Schwab Center for Financial Research.
What’s Next For Bitcoin Mining Stocks?
It remains to be seen what will happen with US inflation rates in August and beyond. Although the rate has slipped from a 40 year peak, it remains high at 8.5% in July.
According to CME FedWatch, traders are betting on a 65% chance that the Federal Reserve will increase interest rates by 50 basis points come September, compared with 32% betting on that outcome just one day ago.
It will be interesting to see how the upcoming Fed data may affect bitcoin mining stocks and other companies in the space.
Featured Image: Megapixl ©Dusanzider
