Parts of the crypto market have been active this week. Bitcoin (Cryptocurrency: BTC). The world's largest token by market capitalization was driven by a resurgence in risk-taking this week after weeks of uncertainty over geopolitics and the Federal Reserve's next move. All of this has pushed Bitcoin up 10.1% over the past seven days as of 2:40pm ET on Friday.
Bitcoin's move has sparked some big moves among leveraged Bitcoin players. According to data provided by S&P Global Market Intelligence, Bitcoin holders micro strategy (NASDAQ:MSTR) The stock has rallied 33.6% this week, but has fallen slightly and is trading 28.8% higher at the time of writing. miners marathon digital (NASDAQ:MARA) At its peak, it rose 21.7%; riot platform (NASDAQ: Riot) Increased by 21.7%. hut 8 (NASDAQ: HAT) Increased by 19.5%. It is currently up 28.8%, 9.3%, and 13.9% for the week.
Big movements in Bitcoin
The value of Bitcoin has fallen in the past few weeks since the halving, when the reward for mining new Bitcoin was cut in half. It also didn't help that investors were concerned that the Federal Reserve would continue to raise interest rates and that conflicts in the Middle East and Eastern Europe would continue to escalate. This uncertainty caused Bitcoin's decline, as its trading was more correlated with growth stocks than as a hedge against Fed moves.
Earlier this week, a resurgence of risk-taking by pandemic-era figures sent many stocks significantly higher, and unsurprisingly, the move spilled over into the crypto market. What's not clear is whether the dynamics of deals that ultimately didn't create fundamental value for any company will continue to support the market.
Utilization of Bitcoin
During that time, companies that utilize Bitcoin will be the biggest beneficiaries. MicroStrategy is one of the companies with the most bullish stance on the Bitcoin market, borrowing money to buy tokens in recent years. This means that when Bitcoin's value falls, stock prices can plummet, and when Bitcoin rises, stock prices can rise sharply.
If Bitcoin rises, miners will have a double benefit. Not only does this mean that what they mine is worth more, but it also means they have more Bitcoin on their balance sheets, taking advantage of the rising value of the token.
This is a balancing act when investing in either MicroStrategy or Bitcoin mining stocks.
Will pop last?
Some of the same dynamics that led to the crypto market peak in 2021 appear to be present today. Stocks are extremely valuable, and the market is overlooking weakening fundamentals and an economy that is starting to show signs of stress. That doesn't seem to affect Bitcoin, but I mentioned earlier that Bitcoin trades more as a growth stock than a financial market hedge.
We have also seen tens of billions of dollars flow into the crypto industry after crypto exchange traded funds (ETFs) were approved and more people started trading again. If the economy slows, these trends may not persist. As a result, I'm staying away from Bitcoin and Bitcoin-leveraged stocks because the risk is not worth the potential reward at this point.
Should you invest $1,000 in Bitcoin right now?
Before buying Bitcoin stocks, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks Things investors can buy right now…and Bitcoin wasn't one of them. These 10 stocks have the potential to generate impressive returns over the next few years.
when to think about it Nvidia This list was created on April 15, 2005…if you invested $1,000 at the time of recommendation. you have $578,143!*
stock advisor provides investors with an easy-to-understand blueprint for success, including guidance on portfolio construction, regular updates from analysts, and two new stocks each month.of stock advisor For the service more than 4 times The resurgence of the S&P 500 since 2002*.
See 10 stocks »
*Stock Advisor will return as of May 13, 2024
Travis Hoium has no position in any stocks mentioned. The Motley Fool has a position in and recommends Bitcoin. The Motley Fool has a disclosure policy.
Bitcoin and Crypto Stocks Popped Again This week's original article was published by The Motley Fool
