Shares of publicly traded Bitcoin (BTC) miners surged on Jan. 9 as traders crowded into stock markets amid mounting bets that the United States Federal Reserve would soon be able to resume its aggressive fight against the ease inflation.
Bitcoin miners Riot Blockchain (RIOT), Hut8 (HUT), Bitfarms (BITF), Marathon Digital Holdings (MARA) and others posted double-digit percentage gains in intraday trading.
The rally coincided with a broad bullish trend in stock markets, with the S&P 500 large-cap index up 1% and the tech-focused Nasdaq up 2% before gaining.
Markets rallied ahead of a much-anticipated US CPI report later this week, which is expected to show continued moderation in cost pressures. On Jan. 7, Labor Department data showed that job creation and wage growth slowed in December, suggesting the Federal Reserve’s rate-hiking campaign was having its desired impact.
According to Bloomberg, swap contracts showed that traders now expect the fed funds’ effective interest rate to peak below 5%, up from 5.06% after the Jan. 6 nonfarm payrolls report. Meanwhile, Fed Fund futures prices suggest traders are expecting less aggressive rate hikes in the coming months.
Related: 3-week highs in BTC price hail US CPI – 5 things to know about Bitcoin this week
In addition to generally favorable market conditions, the rally in bitcoin mining stocks may also have been due to short covering in a low-liquidity market. Short covering is often responsible for the early stages of a rally as traders adjust their positions by buying an asset after previously shorting it.
$BTC Miners are ripping today.
Shorts cover an illiquid market. pic.twitter.com/mwSwIB7K23
— Dylan LeClair (@DylanLeClair_) January 9, 2023
After Bitcoin’s price fell 75% from peak to trough and several crypto firms went bankrupt, the contagion has finally spread to the mining sector. In December, Core Scientific, one of the largest BTC miners by computing power, filed for Chapter 11 bankruptcy in Texas. That same month, mining company Greenridge received a $74 million restructuring lifeline from New York Digital Investment Group.
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