Bitcoin Mining Stocks See Substantial Drawdown Post December Crypto Selloff

Bitcoin faces resistance in low timeframes as it attempts to move up the $50,000 levels. After the weekend crash, the benchmark crypto has struggled to recover and seems to be lagging when compared to other cryptocurrencies.

BTC moving sideways in the daily chart. Source: BTCUSD Tradingview

As a result of the crash, other Bitcoin-based investment products have taken a toll. According to Arcane Research and its Mining Index, BTC mining companies took a heavier loss than the cryptocurrency in a 7-day period.

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As seen in the chart below, while Bitcoin saw a loss of over 20% from its best performing period, publicly-traded BTC mining companies’ part of the Mining Index dropped from 300% to 134% Year-to-Date (YTD). Arcane Research claimed:

The mining index shaved off a significant part of its massive gains this year as it tumbled following the bitcoin sell-off last weekend.

Source: Arcane Research

Comprised of 15 of the biggest BTC mining operations according to their market cap, Arcane Research claims these stocks usually outperform Bitcoin whether it moves to the upside or downside. The stocks are used by many investors as high BTC beta, the research firm claims, and are susceptible to volatility. Arcane Research added:

The recent drop comes on top of a significant decline since the beginning of November, as the mining index has more than halved since then, showing us how volatile these stocks are.

More Pain Or Gains For Bitcoin-Based Companies?

In other words, as the U.S. is yet to provide institutions with access to a product that it’s capable of granting direct BTC spot exposure, they usually tend to buy BTC mining companies stock or stock from companies heavily invested in the cryptocurrency, such as software company MicroStrategy (MSTR).

Amongst the companies that comprised the Mining Index, as seen in the chart above, Hut 8 experienced the worst performance with a 27% decline in its stock price. Yet, the company maintains a 234% increase YTD.

On the other hand, MSTR dropped from above $600 into the lows at $500 on December 3rd. Although the price of this company’s stock has recovered with a 7.30% increase in the past day, it still displays a lot of correlation with Bitcoin.

Bitcoin BTC AR
MSTR with minor profits in the 4-hour chart. Source: MSTRUSD Tradingview

As the price of Bitcoin recovers, these companies will do so faster. In the short term, BTC must reclaim the levels above $53,000 to take aim at its most important resistance for the past months, $60,000.

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A successful move into that zone could provide bulls with enough momentum to reach a new all-time high before the end of 2021.