Cryptocurrency prices attempted to rebound this week after bitcoin on Monday fell to a new June low. JPMorgan noted that bitcoin miners are eliciting greater interest from investors. And one investment firm tapped Hut 8 Mining as an artificial intelligence infrastructure play.
Bitcoin on Monday tumbled to a June low of $58,580. The top cryptocurrency rebounded back to $62,000 by Tuesday, but was unable to recover to its $65,000 level from mid-June. Despite the drop, bitcoin has rallied about 47% so far this year.
"It's summer blues for investors, as crypto market prices tumble and it seems like there is no relief in the near term, and no immediate catalyst to propel prices back upward," Philippe Bekhazi, CEO of digital asset services platform XBTO wrote in a note. "Profit taking is hurting bitcoin and the overall cryptocurrency market, while some geopolitical risk is also creating uncertainty."
Bekhazi and the XBTO team believe the slump could last through the summer. He expects that low-$60,000 to high-$50,000 will be the new trading range for bitcoin.
"Overall, the crypto markets appear to be in a more fragile state than just a few months ago," Bekhazi said. "Investors will be closely watching for signs of stabilization and a return to bullish momentum we witnessed earlier this year."
Mt. Gox Repayment
Bankrupt crypto exchange Mt. Gox on Monday said it will start repaying creditors who lost assets during a hack from over a decade ago. More than 600,000 bitcoin were stolen during the 2011 hack and the exchange went bankrupt in 2014.
Mt. Gox expects payments to start in July in the form of bitcoin and bitcoin cash, MarketWatch reported. As of Monday, Mt. Gox held about 141,687 bitcoin, worth nearly $9 billion. Some investors reported they began receiving some cash payments for the stolen assets earlier this year.
Which Way, Bitcoin Price?
Meanwhile, analysts at the LMAX Group say bitcoin could fall through support or rebound to fresh highs.
"Crypto assets remain under pressure as we get going in the new week," market strategist Joel Kruger said in an emailed response. "At the same time, as per our technical insights, the setbacks continue to be classified as corrective declines within a bigger-picture, bullish consolidation."
Bitcoin is approaching a major support area into $60,000, Kruger said, That "could set up the start to the next big bounce and push back to fresh record highs."
It could also drop deeper this year toward $40,000, if bitcoin were to break below $60,000, Kruger added.
Kruger believes the weakness comes from a combination of a slowdown after positive catalysts early in the year, a lull ahead of ethereum ETF launches and fundamentals in traditional markets.
He pointed to the Fed's recent shift to a less investor-friendly outlook than expected. Also, yields moving in favor of the U.S. dollar have weighed on crypto assets. Recent bitcoin ETF outflows also "haven't done anything to bolster investor appetite."
Charts show leading bitcoin ETFs still consolidating. Most have backed away from what appeared to be near breakout status in early June. Van Eck Bitcoin Trust, Grayscale Bitcoin, Ishares Bitcoin Trust and Valkyrie Bitcoin were among those giving up more than 4% this week through Tuesday, although chart damage was minimal.
As for positive indicators, rates markets continue to price in more investor-friendly policy in the future, despite Fed communications, Kruger said.
"And in the world of crypto, we continue to see evidence of adoption from major players in the traditional finance markets. That points to a bright future for the asset class," he added. Kruger mentioned that Standard Chartered is planning to launch a spot crypto trading desk for bitcoin and ether within its FX trading unit, according to Friday reports from Bloomberg.
Bitcoin Miner Interest Rises
Elsewhere, JPMorgan on Monday said that bitcoin miners are seeing a wave of interest from investors following reports of a major AI deal for Core Scientific in early June.
Core Scientific on June 3 announced an agreement with AI-hyperscaler CoreWeave to provide 200 megawatts of infrastructure for AI cloud computing services. The company will modify multiple of its existing sites to host CoreWeave's Nvidia GPUs.
Core Scientific expects the project to generate more than $3.5 billion in revenue over the course of its 12-year contracts. CoreWeave will provide about $300 million in capital investments, with options to renew the contracts and expand capacity.
JPMorgan on Monday noted that the total market cap of the 14 bitcoin miners it tracks has spiked 22% since the Core Scientific announcement, CoinDesk reported. Meanwhile, bitcoin has retreated about 7% in that time and the S&P 500 has gained 3%.
Analysts Reginald Smith and Charles Pearce wrote that the bitcoin miners market cap spike reflects the "alternative (and potentially more accretive) use cases for mining facilities and the scarcity and value of power access." The Core Scientific deal "validates and will accelerate miners diversifying into high performance computing (HPC) programs."
Bitcoin Miners To Power AI?
Core Scientific isn't the only bitcoin miner being recruited to augment the massive amount of computing power required for AI programs.
Hut 8 on Monday announced it received a $150 million investment from Coatue Management to help with AI computing. Coatue Management is a hedge fund and venture capital firm that primarily invests in technology companies and artificial intelligence.
Coatue's billionaire founder and portfolio manager Philippe Laffont said that computing capacity is vital to unlocking significant growth across the AI ecosystem. Coatue partner Robert Yin added that the broader market "is beginning to appreciate the scarcity of high-quality power assets."
"Many traditional data center operators are failing to meet the surging demand for AI compute capacity due to power shortages, long lead times to bring new capacity online, and the extensive upgrades required for existing data centers," Hut 8 wrote in the news release. The bitcoin miner believes it can leverage its infrastructure to address unmet demand and "emerge as a leader in the AI infrastructure market."
The $150 million investment comes in the form of a convertible note, which has an 8% interest rate per year that is compounded quarterly. The investment has an initial five-year term, with an option for up to three one-year extensions. Coatue will have the option to convert the note into shares of Hut 8 common stock, subject to limitations. The initial conversion price for the note is 16.395 per share, which represents a 45% premium to HUT's 10-day, volume-weighted average price as of June 20.
Crypto Stock Action
Crypto exchange Coinbase rebounded roughly 4.5% Tuesday. COIN stock fell 6% Monday.
Hut 8 stock vaulted 17.2% Tuesday. HUT stock pared gains to 1.5% Monday. Shares rallied nearly 6% Monday morning and was the lone positive bitcoin miner.
Riot Platforms inched higher Tuesday following a 3.6% slide Monday. Marathon Digital rose 1.8% Tuesday after carving 2.7% lower to start the week. CleanSpark eased about 1% Tuesday, adding to its 4.5% drop on Monday.
You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison
