Reasons for Today's Crypto Mining Stock Price Spike

Bitcoin (CRYPTO: BTC) rose 5.9% on Wednesday, topping $1 trillion again, sending crypto mining stocks soaring.

CleanSpark  surged 18.8%, Marathon Digital (NASDAQ: MARA) rose 15.6%, and Riot Platforms (NASDAQ: RIOT) rose 11.9% in early trade. These mining firms' shares rose 17.8%, 10%, 11.6%, and 10.6% at 10 a.m. ET.

Bitcoin only keeps rising. The bitcoin business is gaining pace despite increasing interest rate expectations. Recent evidence includes the iShares Bitcoin Trust reaching 100,000 bitcoins under management, worth $5.2 billion.

The mid-April halving occurrence may potentially boost Bitcoin's value. Sometimes it's "buy the rumor, sell the news," but we're still rumoring for the next halving.

Two factors drove mining stocks up today. The growing price of Bitcoin makes their companies more successful because mining input costs (rigs, power, etc.) don't climb, but revenue does, creating operating leverage.

Since they own crypto on their financial sheets, most of these corporations are leveraged to it. When Bitcoin prices climb, their financial sheets improve. Leverage allows mining stocks to rise more than Bitcoin on days like today. Today's gains might be erased by a drop tomorrow.

Today and in recent months, Bitcoin's price hasn't been driven by utility improvements. Instead, speculators anticipating exchange-traded funds (ETFs) and their market launch have pushed Bitcoin prices.

With new money entering the crypto market, this momentum may continue. I think investors should be wary after momentum trading. Bitcoin is the "digital gold" of the crypto market, but smaller, speedier blockchains are advancing further. Bitcoin may be disrupted by that.

More ETFs for digital currencies other than Bitcoin might convert the momentum into a broader crypto rise, allowing more investors to participate and have alternatives outside the currency with the largest market cap. Investors must recognize upside and negative risks. Bitcoin, miners, and investors are currently enjoying dramatically higher valuations.

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