Stocks in Crypto Companies Are Soaring. Here's Why

Shares in companies involved in the crypto space are on the up following Bitcoin’s price rally. And in one industry in particular—Bitcoin mining.

Shares of Bitcoin mining company HIVE Blockchain Technologies rose by 27% yesterday. 

Colorado-based mining company Riot Blockchain’s stocks were also up by 22%, and shares in Marathon Patent Group—one of the biggest mining companies in the US—increased by 12%. 

Both Riot and Marathon announced in the past week that they were upgrading their mining equipment. Mining company Canaan Creative’s stock was also up by nearly 10% at the time of writing. 

The likely increase in stock value is due to Bitcoin’s phenomenal run: yesterday, it hit a new all-time high of just over $28,000 (after breaking records all week.)

Its price then dropped but has since held steady. As of today, it stands at just under $27,000, according to CoinMarketCap data. 

With more people investing in Bitcoin and using the currency, more mining energy is needed to process transactions and keep the network running smoothly. It is a costly and energy-intensive process—but now more necessary than ever.

Torkel Rogstad, a software developer at crypto-research firm Arcane, told Decrypt that the returns can be “massive,” and that the increases in mining company stock prices are likely down to traditional investors facing restrictions in buying Bitcoin as a currency itself. 

“If I'd have to pinpoint it to one thing, it's probably a lack of publicly listed investment opportunities giving exposure to Bitcoin,” he said. “I personally can invest in whatever I'd like, but if you're investing your pension portfolio that might only be allowed to be invested in stocks. Same thing applies to funds; they typically have very strict rules for what they can invest in—their so-called investment mandate.”

He added: “So investing in Bitcoin companies can be a way for traditional financial institutional money to get bitcoin exposure, even if they aren't allowed to invest in bitcoin directly.”

Companies putting their money in Bitcoin are also doing well. Business intelligence firm, MicroStrategy, is heavily invested in Bitcoin—its stock was yesterday up by nearly 15%.   

And ETFs that invest in crypto-related companies are seeing returns. These are investment vehicles that track the value of companies developing crypto or blockchain technology.  

Amplify Transformational Data Sharing, for example, is invested in companies such as investment firm Galaxy Digital, Bitcoin mining company Hut 8, and payment company Square. Its stock was yesterday up over 3%; and this month, nearly 15%, according to Yahoo Finance data.  

The Reality Shares Nasdaq NexGen Economy, which is invested in Galaxy Digital and Square, is also seeing its stock increase: in the past month by 3%. 

The price of Bitcoin isn’t the only thing on the up.