The biggest cryptocurrency's impending code change is causing mining companies to lose money, which is reflected in the sharp drop in stock values of these companies.
For the past three days, the stock prices of companies including Riot Blockchain Inc., CleanSpark Inc., and Marathon Digital Holdings Inc. have decreased.
This month, the value of the exchange-traded fund Valkyrie Bitcoin Miners has decreased by almost 28% as well.
Mining Stocks Are Further Pressurized by Geopolitical Tensions
Recent geopolitical concerns and the accumulation of short interest in crypto-mining companies are exacerbating the downward trend in Bitcoin mining equities.
Due to Iran's weekend retaliatory attack against Israel, investors are now operating in a risk-off atmosphere.
The CEOs of these mining companies, however, are upbeat about the future despite these difficulties, pointing to low-cost operations, more effective equipment, and growing demand for cryptocurrencies as things that can counteract the expected revenue losses brought on by the impending software update.
The CEO of Riot Blockchain, Jason Les, expressed optimism about Bitcoin's future.
In a recent interview with Bloomberg Television, he stated, "Riot is here for the long term. Our long-term investment thesis on Bitcoin is strong, and I think we have the setup for a very positive movement in Bitcoin over the next several months here."
Using specialized computers, bitcoin mining is an energy-intensive operation that verifies transactions on the blockchain and pays users with tokens.
These payments, known as the "halving" since they are halved every four years, generate the majority of mining earnings.
With the impending halving—the fourth since 2012—the daily output of Bitcoin incentives will drop from 900 to 450 tokens.
Demand Growth May Lessen the Adverse Effects of Cutting
By pushing up the price of Bitcoin, miners expect that increasing demand from new spot exchange-traded funds (ETFs) would lessen the negative effects of the halving.
The digital asset has grown significantly since these ETFs were introduced by conventional asset management companies in January, drawing billions of dollars from investors outside the bitcoin ecosystem.
According to Tyler Page, CEO of Cipher Mining, "I think it is very hard to predict Bitcoin prices on any kind of short-term time frame."
"However, I believe that adoption has followed a consistent path over the years, so we can continue to be really optimistic about the network's uptake."
Kris Marszalek has admitted that the "buy-the-rumor, sell-the-news" trading phenomena may lead to selling pressure in the near future.
He did stress, though, that the market will benefit greatly from the halving in the long run.
"Over an extended duration, the reduction will yield a notable impact and is a favorable evolution for the industry."
The CEO of Marathon, Fred Thiel, stated last week that the market might have already taken into account a portion of the much awaited “halving” of Bitcoin.
April 2024, Cryptoniteuae