Bitcoin mining stocks tumble after double-digital gains

Shares of bitcoin (BTC-USD) mining operators, including Riot Blockchain (RIOT) and Marathon Digital Holdings (MARA), have moved into the red Thursday morning. The stocks have reversed course following major gains amid pending approval for a spot bitcoin ETF by the Securities and Exchange Commission (SEC).

Yahoo Finance Crypto Reporter David Hollerith takes a look at Riot’s and Marathon’s plans to expand its crypto mining operations in 2024 and Cathie Wood’s recent sale of ARK Invest’s remaining Grayscale (GBTC) shares.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

[VIDEO LOGO]

RACHELLE AKUFFO: Shares the Bitcoin mining companies are reversing course this morning. This comes after double digit gains miners saw coming off hopes of a Spot Bitcoin ETF and a positive outlook for cryptocurrencies in 2024. Let’s bring in Yahoo Finance’s David Hollerith to give us more details. Hey, David.

DAVID HOLLERITH: Hey, Rachelle. Bitcoin has been down– or it’s slightly up, but it’s been more or less flat over the past week. And the important thing to know about Bitcoin miners is that they have to borrow a lot of money to make upfront purchases for mining equipment. And two notable publicly traded mining firms, Riot and Marathon Digital, have both announced acquisitions, Riot for purchasing more mining equipment and Marathon to acquire two new Bitcoin mining sites. So they are heavily levered as a result of needing all this debt. So their stocks can be expected to trade fairly volatile.

But I would say outside of the on-the-day movements, in general, the amount of investment that these firms are taking, given that they’re so heavily levered, is one more data point we can take around this optimism for what Bitcoin might look like next year. Obviously, there’s the possibility of the Bitcoin Spot ETFs to be potentially launched as soon as January if the SEC grants approval.

Story continues

But we also have some more optimistic macro environment with the possibility of fed interest rate changes next year. And then also the Bitcoin halving, which is a specific Bitcoin type supply change that happens every four years. So in general, I think this is a sign despite on-the-day moves about– there’s a lot more leverage that industry firms are putting into an optimistic next year for Bitcoin.

RACHELLE AKUFFO: And David, speaking of signs and reading the tea leaves, so Cathie Wood, ARK Invest founder and CEO, she also sold the remaining 2.25 million shares in Grayscale Bitcoin and bought over four million shares of ProShares Bitcoin. Help us understand what’s going on there and what this means for the landscape within Bitcoin.

DAVID HOLLERITH: So wood was on Bloomberg TV this morning, and she also spoke to us earlier in the week. And on Bloomberg, she said that the GBTC shares were sold one out of an abundance of caution, given the uncertainty about whether Grayscale would be able to convert their investment trust into an ETF, given the tea leaves of a potential approval for these products in January.

She also indicated that GBTC has also had a very good run this year. Earlier this week, when she spoke to us, she admitted that in anticipation for the ETF movement, investors have seen nice profits. And because of the Grayscale Bitcoin Trust historical discount, because it’s not a full ETF, it’s actually seen much higher return than Bitcoin this year. So they’re in a fairly good place to take some profits.

ARK is also in the running to gain SEC approval to issue one of these Spot Bitcoin ETFs. And speaking with our anchor Julie Hyman this week, she would actually admitted that of the dozen or so potential issuers of these products, if they are all to be cleared, there’s still only a chance of one two three or so, is what she said, winners to take market share. The ETF game is all about liquidity.

And I think I would just add to that too. We don’t have any clarification on this. But given that ARK is potentially launching an ETF– Spot Bitcoin ETF in the near future, it would make sense that ARK could potentially be taking some of those funds it sold from Grayscale and maybe temporarily parking them in BITO. We don’t know this for sure. And eventually, putting that money into their own ETF to add a liquidity boost or advantage when these ETFs or if these ETFs are launched to help them gain market share.

RACHELLE AKUFFO: David Hollerith always having us covered from Bitcoin to banks. Thank you.