Bitcoin mining stocks are in a freefall. Marathon Digital (MARA) stick price is on track for the third straight weekly decline even after the SEC approved a spot Bitcoin ETF. It retreated to $20, much lower than the year-to-date high of $31.26.
Similarly, Riot Platforms (RIOT) shares crashed to $12.2 while Argo Blockchain plummeted to $2 in New York. Other Bitcoin mining companies like Bit Brother, Hut 8 Mining, and Bitfarms also continued falling.
This sell-off is because of the performance of Bitcoin. After soaring to over $49,000 on Thursday, it has now pulled back to $44,000, erasing billions in market cap. There is also a risk that this sell-off will intensify in the coming days.
Bitcoin crashed after the ETF approval because of a situation known as buy the rumour, sell the news. This is a situation where a financial asset rallies ahead of a major event and then retreats when the event happens.
Bitcoin has been in a strong upward trend after Blackrock filed for a spot ETF approval. This filing was followed by that of companies like Franklin Templeton, Invesco, Fidelity, and Ark Invest. Because of the nature of these companies, investors believed that the SEC would have no option than to list them.
Another recent example of buying the rumour and selling the news happened in July last year when the SEC lost in its lawsuit against Ripple. The XRP price jumped initially and then plunged. It has never recovered since then.
Bitcoin has a close correlation with mining stocks like Riot Platforms and Marathon Digital. When it drops, they fall further, and vice versa.
The other reason why MARA, RIOT, HUT, and BETS are plunging is that hopes of a Federal Reserve cut in the near term have faded. That is after the US published strong non-farm payrolls (NFP) data last week and high inflation figures this week. Therefore, there is a likelihood that the first rate cut will happen in June instead of March.
This also explains why US equities are plunging. The Dow Jones index dropped by more than 180 points on Friday while the S&P 500 erased over 35 points.
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