The cryptocurrency landscape is still met with an air of mystery among many Wall Street investors. But as new inflation data suggests a period of uncertainty lies ahead, is it time to wake up to the growth potential of the crypto industry’s mining stocks?
Cryptocurrency mining stocks have hardly set Wall Street alight in recent years, so why should now be the time for investors to sit up and take notice?
The answer lies in the recent Bitcoin halving event, which is pre-programmed to actively halve the volume of the cryptocurrency awarded to its miners as block rewards.
The Bitcoin halving event is a pre-programmed deflationary measure to improve the scarcity of BTC, and has historically been the precursor to extraordinary market rallies for the cryptocurrency which has always resulted in a new all-time high and a wider bull market for the industry.
With the most recent halving event taking place on April 19th, we’ve already seen a series of significant price movements for leading crypto mining stocks.
The Post-Halving Jump
US-listed crypto mining stocks rallied in the wake of the halving event, with some posting double-digit gains in the span of 24 hours.
Stronghold Digital Mining (SDIG) was the biggest winner from day trading immediately after the halving, posting growth of 35.3% to $3.64 before consolidating its position in the days that followed.
Other mining firms like Riot Platforms (RIOT), CleanSpark (CLSK), Cipher Mining (CIFR), and Hut 8 (HUT) also experienced significant gains following the event.
As we can see by zooming out to Stronghold Digital’s performance throughout the year, a 35.3% jump appears less impressive when considering the stock’s wider decline in 2024.
The story is similar for many mining stocks, with the likes of Riot Platforms and Hut 8 also experiencing sustained declines throughout 2024 so far. Although CleanSpark is a notable exception, which almost doubled in value in the first quarter alone.
Halving as a Catalyst for Growth
Despite the mixed fortunes of crypto mining stocks on Wall Street, the chances are that most CEOs will be unfazed by 2024 performance prior to Bitcoin’s halving event.
In fact, Yahoo! Finance data suggests that crypto miners have been running down their Bitcoin inventories to three-year lows despite the cryptocurrency’s strong start to 2024 in a strategic move to prepare for life after the halving event.
This seemingly counterintuitive measure is almost certainly a concerted effort among miners to use their BTC inventories to upgrade equipment and create a more sustainable operational model ahead of seeing their Bitcoin rewards cut in half from April onwards.
Not only does this move signify the intent of crypto mining firms to take advantage of the changing mechanics of Bitcoin, it also underlines the faith they have in the performance of the cryptocurrency following the event.
There’s a good reason for this. Bitcoin’s halving cycle, which takes place approximately every four years, has paved the way for new all-time high values and whirlwind bull markets in all of the three times its occurred before.
Evidence of this can be found in Bitcoin’s Stock to Flow (S2F) model, which charts the performance of the coin in relation to its past halving events. The chart shows that Bitcoin’s post-halving price rallies generally peak at between one year and 18-months on from a halving event, and that they’re proceeded by extended periods of slower growth.
What is it about Bitcoin’s halving that drives such significant growth? It all comes down to supply and demand, which has been further thrown into the spotlight in the wake of the SEC’s approval of spot Bitcoin ETFs.
“Since the beginning of February, approximately 3500-4300 BTC have been purchased daily through spot Bitcoin exchange-traded funds (ETFs), with daily production of around 900 BTC,” explains Maxim Manturov, head of investment research at Freedom Finance Europe. “This significant demand outweighs the available supply in the market, fuelling price increases.”
“The supply shortage has worsened further after the halving in April, when only 450 BTC can be mined daily. This imbalance between supply and demand emphasises the potential for further price increases in the near future,” Manturov adds.
Following Bitcoin’s 2016 halving event, BTC reached a new all-time high value of $19,511, after the 2020 halving, Bitcoin rallied to $69,000. While Bitcoin’s S2F model has fancifully forecasted Bitcoin to reach an astronomical $444,810 by April 18th 2025, many analysts believe that a six-figure BTC is entirely plausible should the 2024 halving follow its familiar patterns.
Will Crypto Miners be Wall Street’s Unlikely Heroes?
The recent market upturns experienced by cryptocurrency mining firms comes at a time when Wall Street is struggling to come to terms with the reality of a stubborn consumer price index (CPI), and the prospect of higher-for-longer interest rates.
So far, the S&P 500 has struggled to build momentum in the second-quarter, and even last years stock market stars like Nvidia have experienced price volatility amid the uncertainty.
The unique position of crypto mining firms as key players in a decentralized industry that’s widely expected to undergo significant growth off the back of the Bitcoin halving is that they should theoretically be immune to such market challenges.
Whether this is actually the case remains to be seen, but what we can be sure of is that historical performance is more closely linked to the price movements of Bitcoin, rather than Wall Street itself.
Using CleanSpark as an example, we can see that the stock underwent a significant period of growth that correlates with Bitcoin’s 2017 and 2021 bull market, and an overall upturn in performance this year is tracing BTC’s own movements.
Risks and Opportunities on Wall Street
So, are crypto mining stocks a certified buy for investors? It’s worth highlighting that Bitcoin’s post-halving outlook hasn’t been entirely positive.
Bloomberg data suggests that the instant halving of Bitcoin’s hashprice may cause a major problem for miners seeking profitability.
Although evidence suggests that mining firms have been building on their hardware infrastructure to assure sustainability in the post-halving landscape, miners will still be competing for the same block rewards–meaning that profitability is likely to be far weaker without a Bitcoin price rally.
With this in mind, investors seeking to add crypto mining stocks may need to think twice about this strategy if they don’t see the potential for a BTC price rally over the mid-term future.
For more bullish investors, backing lagging crypto mining stocks like Riot Platforms, Hut 8, or Cipher Mining on the expectation of a wider cryptocurrency market rally could open the door to potential short squeeze opportunities should markets fail to buy into the prospect of Bitcoin as a driver for growth.
As always, this decision falls on the discretion of investors. However, with historical trends appearing to favor crypto mining stocks at a time when Wall Street is set for a sustained period of uncertainty, building exposure could be an effective piece of portfolio diversification.
