Crypto Bear Market: Is it Time to Buy the Dip?

The crypto bear market persists in the second half of 2022, throttling digital mining stocks like Hut 8 Mining Corp. (TSX:HUT)(NASDAQ:HUT).

| More on:
Diagonal chain made of zeros and ones. Cryptocurrency and mining.

Image source: Getty Images

The cryptocurrency space has been throttled in 2022. This came after digital currencies rattled off record valuations in 2021, luring in many new investors and securing celebrity endorsements. Today, I want to discuss how we got to this point and whether top cryptocurrencies and crypto stocks can return to form in the months ahead. Let’s dive in.

How did crypto fall into a bear market?

In the spring of 2021, the total crypto market capitalization rose above $2 trillion. Its value has nearly halved in the year-over-year period. The crypto market was worth approximately $1.2 trillion at the time of this writing.

Inflation rates in the United States and Canada have soared to multi-decade highs in 2022. That has spurred central banks into action. Both the Bank of Canada (BoC) and the U.S. Federal Reserve have pursued aggressive interest rate hikes to curb inflation. That has put pressure on equities, real estate, and the cryptocurrency market. Moreover, there is no sign that central banks intend to reverse course in the coming months.

The crypto bear market has torn into the top digital currency

Bitcoin, the top cryptocurrency by market cap, has struggled mightily over the past year. Purpose Bitcoin ETF launched on the TSX back in February 2021. This allowed Canada to launch the first Bitcoin-focused exchange-traded fund (ETF) at the height of the crypto craze. Shares of this ETF have plunged 56% in 2022 as of close on September 1.

The price of Bitcoin was traded at just over US$20,000 at the time of this writing. That puts the world’s top digital currency near a 52-week low. It is hard to recommend Bitcoin in the middle of the crypto bear market. Digital currencies have been throttled, as interest rates have climbed. Worse, a recession could apply even more pressure on the fledgling financial space.

Can these two crypto mining stocks bounce back in late 2022 and 2023?

Crypto mining stocks have been at the mercy of spot price for Bitcoin and other top coins like Ethereum in 2022. Hut 8 Mining (TSX:HUT)(NASDAQ:HUT) is a Toronto-based cryptocurrency mining company. Its shares have plunged 75% in 2022 as of close on September 1. The stock is down 77% year over year.

This company released its second-quarter fiscal 2022 results on August 11. Revenue rose $10.3 year over year to $43.8 million. Meanwhile, it mined 946 Bitcoin in the quarter — up 71% from the second quarter of fiscal 2021.

HIVE Blockchain Technologies (TSXV:HIVE)(NASDAQ:HIVE) is a Vancouver-based cryptocurrency miner that operates in Canada, Sweden, and Iceland. This crypto stock has plummeted 63% so far in 2022. Its shares are down 69% year over year.

Investors got to see HIVE’s most recent quarterly report on July 20. It delivered revenue growth of 212% from the previous year to $211 million. Meanwhile, it achieved record net income of $79.6 million — up $24.1 million compared to the second quarter of fiscal 2021. Unfortunately, both crypto mining stocks are set to hit major headwinds due to the precipitous decline in crypto valuations. Those losses have largely been priced in.

These equities look undervalued at the time of this writing. However, I’m not eager to seek exposure to the reeling crypto market anytime soon. It is especially dangerous in this volatile environment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends Bitcoin and Ethereum.

More on Investing

Dollar symbol and Canadian flag on keyboard
Energy Stocks

3 Canadian Stocks You Can Confidently Buy Now and Hold Forever

You don’t need to think twice about loading up on these three top stocks.

Read more »

edit U-turn
Dividend Stocks

Down 11% From its 52-Week High, Can goeasy Stock Turn Things Around?

Investors looking for value should be drooling at goeasy (TSX:GSY) stock. With a higher dividend and more room to run,…

Read more »

A microchip in a circuit board powers artificial intelligence.
Investing

2 Ways to Safely Invest in AI (Artificial Intelligence)

Here are two Canadian ETFs that provide more diversified exposure to AI stocks.

Read more »

data analyze research
Investing

Canadian Tire Stock Is Getting Ridiculously Oversold

Canadian Tire (TSX:CTC.A) is a deeply discounted dividend stock that could roar as inflation and rates tank from here.

Read more »

risk/reward
Bank Stocks

TD Bank Stock: Worth the Risk for Long-Term Gains

Yes, the company has concerns. But long-term investors should be able to reap the rewards from TD Bank (TSX:TD) as…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Tuesday, July 23

TSX stocks may remain volatile today as investors look forward to the second-quarter earnings season and the Bank of Canada’s…

Read more »

calculate and analyze stock
Dividend Stocks

Sun Life Stock Is Paying $3.24 Per Share in Dividends: Time to Buy the Stock?

Sun Life (TSX:SLF) stock recently bumped its dividend upwards by 4%, creating even more value for investors today.

Read more »

Payday ringed on a calendar
Bank Stocks

TFSA Passive Income: Earn $500/Month

High yield stocks like First National Financial (TSX:FN) can get you to $500 per month in passive income with surprisingly…

Read more »