Bull Market Frenzy: Bitcoin Price Defends $22.5k, Mining Stocks Follow Suit

The cryptocurrency market is making headlines as Bitcoin’s price broke above $22,500 on Jan. 20 and has maintained that level, accumulating 40.5% gains in the month of January.

However, according to the data from CoinMarketcap, BTC is currently trading at $22,649.82. The surge was accompanied by a rally in the stock market following China’s easing of COVID-19 restrictions.

E-commerce and entertainment companies lead the market performers with impressive year-to-date gains. Warner Bros added 54%, Shopify 42%, MercadoLibre 41%, Carnival Corp 35%, and Paramount Global managed a 35% gain.

Investors continue to be drawn to strong corporate earnings, with oil-producer Chevron posting the second-largest annual profit ever recorded at $36.5 billion.

Whereas the tech giant Apple is expected to post a staggering $96 billion in earnings for 2022 on Feb. 2. This surpasses the $67.4 billion profit reported by Microsoft in 2022 and reinforces the current stock valuations. However, strong earnings do not guarantee a brighter future for the economy.

Bitcoin Derivatives: A Look at Professional Traders’ Positions

Evercore ISI’s senior managing director, Julian Emanuel, stated that a more favorable scenario for risk assets came from a decline in leading economic indicators such as homebuilders, trucking surveys, and contracting Purchasing Managers Index (PMI).

Matrixport’s research shows that American institutional investors represent 85% of recent purchasing activity, indicating that large players are “not giving up on crypto.

While Bitcoin bulls have reason to celebrate as the price recovered 49% from November 2021 low, bears still have the upper hand on a larger time frame as BTC is down 39% in 12 months.

Mining Industry Under Stress: Hashrate Index Up 62.5%

The mining industry faced challenges in the last quarter of 2022, with the collapse of FTX and the bankruptcy of Core Scientific, the largest U.S.-based Bitcoin mining company. During this time, mining stocks showed a weak correlation with Bitcoin’s price, suggesting that the downturn was probably overblown.

However, the trend reversed at the start of 2023, as most mining stocks posted impressive gains. The Hashrate Index, which tracks the average price of publicly listed mining and hardware manufacturing companies, increased by 62.5% year-to-date.

The positive price spike restored the strong correlation between BTC prices and mining stocks. But the industry remains under stress, with low-profit levels expected for prolonged periods. Unless Bitcoin’s price consolidates above $25,000, the industry may witness takeover attempts or further treasury sales to pay off debt.