Why retail traders are snapping up cryptocurrency stocks

Retail traders, responsible for wild price swings in everything from GameStop to Revlon, have returned to another old favorite: battered cryptocurrency stocks.

Over the past 10 days, they have scooped nearly $1 billion worth of shares from companies exposed to cryptocurrency, according to a report published Wednesday by VandaTrack. This rapid burst of buying led to stocks such as Marathon Digital Holdings, Coinbase Global and Riot Blockchain among the most bought assets on Fidelity’s platform this week.

“Retail traders are definitely surfacing here,” said Ed Moya, senior market analyst at Oanda. “Everyone was expecting one last major dip for Bitcoin and now prices are recovering and risk appetite on Wall Street is improving somewhat.”

With the resurgence, the NYSE FactSet Global Blockchain Technologies Index is now on track for its biggest monthly gain since February 2021.

Among its biggest gainers this month, Marathon Digital jumped 133%, while Riot Blockchain, Silvergate Capital and Coinbase all soared at least 50%. These stocks are still down more than 40% this year.

The Bloomberg Galaxy Crypto Index, which tracks the performance of the biggest digital assets including Bitcoin, has climbed around 35% during this period.

And half of the top 20 performing U.S. ETFs since late June are cryptocurrency-related. However, Bitcoin is still down around 51% this year.

Despite July’s rebound, cryptocurrency-related companies have been among the worst-performing stocks this year as investors fled risky assets amid concerns that the Federal Reserve’s aggressive policy-tightening regime could tip the scales. the economy in a recession.

The collapse of stablecoin TerraUSD and the subsequent pullback of companies such as Celsius Network and Three Arrows Capital have only exacerbated these losses in recent months.

Mining stocks took a particularly hard hit as Bitcoin prices fell from a record high of nearly $69,000 in November to a two-and-a-half-year low of less than $18,000 last month. Bitcoin’s plunge prompted several analysts to declare a so-called “crypto winter” as around $2 trillion in market value was wiped out of the digital token space.

Even one of the biggest influencers in the cryptocurrency space has apparently started getting cold feet. On Wednesday, Elon Musk’s Tesla revealed that it sold the majority of its Bitcoin holdings during the second quarter, saying the move was made to provide the electric vehicle maker with additional cash.

But that hasn’t deterred some traders. With Bitcoin on course for its first monthly gain since March, the retail crowd turned out in droves, especially flocking to mining stocks.

The $7.4 million Viridi Bitcoin Miners ETF has jumped around 33% this month, making it one of the best performing exchange-traded funds listed in the US in July. Stronghold Digital Mining, which is owned by the ETF, jumped more than 79% in the same period and is on track for its best month ever.

The miner’s trading volume soared to more than 100 million shares on Wednesday, more than 70% of its total trading volume since its IPO last year, a sign of interest from retail investors.

“Any time a stock or group breaks out of a multi-month range to the upside, the rally typically lasts for several weeks,” said Matt Maley, chief market strategist at Miller Tabak + Co. “It doesn’t happen. will not produce in a straight line, so they could take a break at any time, but the line of least resistance is now in place.

Updated: July 24, 2022, 5:30 a.m.

Garland K. Long