Here’s why BITF, CLSK, and MARA stocks are flying

2024-1-26 20:19

Bitcoin mining stocks recharged on Friday, becoming some of the best performers in Wall Street. Marathon Digital (MARA) stock surged by more than 12% while Bitfarms (BITF) and Cleanspark (CLSK) surged by more than 10%. Other mining stocks like Riot Platforms and Argo Blockchain also bounced back.

The main reason for this rebound is that there are signs that the recent Bitcoin sell-off seems to be bottoming. After plunging to $39,500 this week, the coin went vertical on Friday and reached a high of $42,000. This rebound happened after Bitcoin formed a hammer pattern on the daily chart.

Bitcoin price has been in a strong bear market in the past few weeks following the SEC approval of eleven spot Bitcoin ETFs. The implication of this is that many investors who had money in the Grayscale Bitcoin Trust (GBTC) have been withdrawing and moving to other ETFs. Besides, it is the most expensive Bitcoin ETF in the market with an expense ratio of 1.50%.

Therefore, the current Bitcoin surge is likely because investors believe that the sell-off is now fading. Further, the jump happened after the US published encouraging PCE numbers. According to the statistics agency, the headline PCE came in at 2.9% in a sign that it is still on track to hit $2.0%.

The PCE figure is an important one because it is the Fed’s favourite inflation gauge by the Fed. In a note after the report, most analysts said that the Fed will likely start to slash interest rates by June this year. In a note, Sonu Varghese of Carson Group said:

“The big picture is that the Fed doesn’t need to worry that stronger economic growth will stoke inflation because it hasn’t. We are expecting rate cuts in 2024, starting in May, likely looking at four cuts of 25 basis points each.”

Bitcoin mining stocks thrive when there is talk of a dovish Federal Reserve. This also explains why the Nasdaq 100 and S&P 500 indices continued rising after the PCE report on Friday.

Still, while the long-term outlook for Bitcoin is bullish, there is a possibility that this rebound is a dead cat bounce. This is a brief rebound that happens when an asset is in a strong downward trend. It bounces and then resumes the downward trend.

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