The last trading day of 2023 ended with a thud for major cryptocurrency and Bitcoin mining stocks, which tumbled as much as 17% amid a broader market sell-off.
According to Google Finance data, Bitcoin mining firms were especially hard hit in the December 29 selloff. Shares of Marathon Digital Holdings (MARA) plunged 16.6% to close at $23.50, while Riot Platforms (RIOT) dropped 12.1% to end the day at $15.50. Hut 8 Corp (HUT) and Hive Digital Technologies (HIVE) saw even steeper declines of 17.3% and 15.1% respectively.
MicroStrategy (MSTR), the business intelligence company that has embraced Bitcoin as its primary corporate treasury asset, fell 5.4% to $631.60. And Coinbase (COIN), the largest US-based cryptocurrency exchange, dropped 6.6% to $173.90, falling another 1.25% to $171.70 in after-hours trading. Coinbase stock had surged over 400% in 2023.
According to Mitchell Askew, head analyst at Bitcoin mining firm Blockware Solutions, the sharp declines were a “healthy pullback” after many crypto-related stocks saw massive gains last year.
“They were overextended beyond their previous 2023 highs despite BTC being flat at 43k for the month of December,” Askew noted in comments to Cointelegraph.
Markus Thielen, head of research at cryptocurrency financial services company Matrixport, shared a similar perspective. “We warned [investors] that their stock prices had reached fair value versus bitcoin last week or, in some cases, were even overvalued,” Thielen stated.
The selloff may also reflect concerns among investors that the upcoming Bitcoin halving in April, which cuts in half the rewards paid to miners, could negatively impact the balance sheets of publicly traded mining companies. But Askew believes those worries are overblown.
“Public miners have the most efficient ASICs and lowest power costs, allowing them to survive the halving without any issues,” Askew said.
While Bitcoin itself gained 152% in 2023 to reach $42,325, it lagged behind at least 15 cryptocurrency stocks that saw triple-digit percentage gains last year, according to data from nsquaredcrypto. Marathon Digital was one of the top performers, rocketing nearly 600% in 2023.
So the New Year’s Eve plunge for names like Marathon, Riot, MicroStrategy and Coinbase may simply represent traders locking in profits after a banner year for crypto equities. With Bitcoin stuck in a holding pattern around $43,000 in December, investors likely decided to cash out some of their stock market winnings ahead of 2024.
The recent pullback illustrates the high volatility and risk associated with cryptocurrency stocks. But for long-term focused investors, the sector still offers substantial potential upside if adoption of digital assets like Bitcoin continues accelerating. While timing the market is exceedingly difficult, dollar-cost averaging into positions can help mitigate the impact of short-term price swings.
