Crypto Mining Stocks Decline Amid Fed’s Economic Warnings
May 28, 2023 — By Ciaran Lyons
The U.S. market for cryptocurrency mining stocks saw a significant downturn at the close of trading on May 28, influenced by recent statements from the Federal Reserve about the economic outlook. While stocks related to crypto mining suffered losses, the broader cryptocurrency market displayed a degree of resilience amidst the turmoil.
Federal Reserve’s Warning
The Federal Open Market Committee (FOMC) released minutes from its recent meeting, held on May 6 and 7, which indicated growing concerns regarding the economic landscape. The minutes highlighted “difficult tradeoffs” the Committee might face if inflation persists while growth and employment figures weaken. The Fed maintained interest rates in the range of 4.25% to 4.50% during the May meetings, primarily due to rising uncertainty about the economic outlook, including potential increases in both unemployment and inflation.
Impact on Mining Stocks
Following the release of the Fed’s minutes, key players in the crypto mining sector experienced substantial declines. Riot Platforms (RIOT) saw a decrease of 8.32%, while CleanSpark (CLSK) went down by 7.61%. Marathon Digital Holdings (MARA) was notably impacted as well, closing down 9.61% on the day. However, there was a slight rebound for Marathon in after-hours trading, where it gained 2.56% according to Google Finance data.
In tandem with mining stocks, other cryptocurrency-related companies faced challenges. For example, Coinbase (COIN) dropped 4.55%, and MicroStrategy (MSTR), led by Michael Saylor, extended a five-day decrease with a further decline of 2.14% following a class-action lawsuit alleging misrepresentation of Bitcoin investments by company officials.
The broader stock market also felt the pressure, with the S&P 500 index dropping by 0.56% during the trading day.
Market Stability in Cryptocurrency
Despite the downturn in mining stocks, the overall crypto market remained relatively stable. Bitcoin (BTC), for instance, recorded a slight decline of 0.90%, trading at approximately $107,942 at the time of publication. Over the past week, Bitcoin has experienced a total drop of 2.06%, according to data from CoinMarketCap.
The Crypto Fear & Greed Index, a measure of market sentiment, saw a slight uptick, climbing three points to 74, indicating a transition into "Greed" territory among investors. This sentiment reflects a prevailing optimism that may be buoying parts of the crypto market even as stocks falter.
Looking Ahead
All eyes are now on the upcoming Federal Reserve interest rate meeting scheduled for June 18, where expectations are that rates will remain unchanged, as indicated by a significant majority (97.8%) of market participants surveyed through the CME FedWatch Tool. These discussions will be pivotal in shaping future market conditions for both traditional equities and cryptocurrencies.
Conclusion
The decline in crypto mining stocks signals growing caution among investors amid uncertain economic forecasts from the Federal Reserve. While the broader cryptocurrency market has shown resilience, reactions to upcoming Federal Reserve actions will likely play a crucial role in determining the trajectory of both mining stocks and digital currencies in the near future.
Disclaimer: This article does not constitute investment advice. Readers are encouraged to conduct their own research before making investment decisions.
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