Just by itself, blockchain mining specialist Cipher Mining (CIFR) appears a solid candidate for enterprises that can build upon ongoing momentum. For one thing, CIFR stock gained nearly 11% of equity value last Friday. In contrast, the performance of the benchmark S&P 500 index was muted, down 0.29%. Moreover, the Barchart Technical Opinion indicator rates CIFR a 100% strong buy.
According to the underlying investment resource, the price action of Cipher shares ranks in the top 1% of all short-term signal directions. As well, long-term indicators fully support a continuation of the trend. About the only technical issue for CIFR stock is that its relative strength indicator (RSI) reading prints 74.57, which signifies an overbought status.
However, a hot RSI reading isn’t exactly a death sentence for a robust rally. Plus, the underlying cryptocurrency market has enjoyed renewed optimism, particularly from institutional investors eager to bank on blockchain-derived digital assets.
At the same time, the latest rumblings in the options market don’t appear to align particularly well for CIFR stock. In addition, the latest economic data may apply significant pressure on risk-on assets moving forward. Frankly, it doesn’t get much more risk on than virtual currencies. Stated differently, anyone targeting cryptos or crypto-related enterprises must do so extremely cautiously.
Options Traders Move the Other Way for CIFR Stock
Although CIFR stock represented a huge winner in the open market, the derivatives market appeared to represent a different story altogether. Following the close of the July 7 session, CIFR was one of the top highlights in Barchart’s screener for unusual stock options volume.
Specifically, total volume hit 23,943 contracts against an open interest reading of 29,003. Further, the delta between the Friday session volume and the trailing one-month average metric came out to 919.72%. Drilling down, call volume mustered only 1,547 contracts while put volume clocked in at 22,396. This pairing yielded a rather gaudy put/call volume ratio of 14.48.
Per Barchart, the put/call open interest ratio stands at 1.58. Since puts generally represent bearish wagers, ratios above the 1:1 threshold signify bearish sentiment.
Looking at options flow data from Fintel, the most recent major transactions involved the selling of puts (with an expiration date of July 21, 2023), which symbolizes bullish sentiment. However, these transactions occurred on June 23, shortly after the crypto sector enjoyed its present resurgence. Since then, however, cryptos have been rangebound, posing concerns for options traders.
Yes, call the crypto market right and downwind assets – such as the equity shares of blockchain miners – may very well skyrocket. Get it wrong, though, and you’re looking at serious pain.
What’s likely on the minds of speculators of CIFR stock is the June jobs report. From the perspective of the Federal Reserve, it was an encouraging print, particularly one day following the ADP employment data that showed much hotter-than-anticipated results. For the former report, the economy added 209,000 jobs, which was below economists’ expectations.
Still, wage growth held steady, defying expectations for a slowdown in the metric. Also, the unemployment rate ticked a bit lower, suggesting underlying strengths in the labor market. Therefore, the Fed might still be looking to raise interest rates to curb inflation. Of course, that wouldn’t be helpful to cryptos nor by logical deduction to CIFR stock.
Risky Financial Proposition
Another factor to consider regarding possible impediments to upside in CIFR stock is the underlying financials. Essentially, blockchain or crypto-related enterprises are tied too heavily to sentiment for digital assets. For mainstream investors, the wild ebb and flow of this sector may be excessive.
With Cipher Mining, the company only posted revenue for the fourth quarter of 2022 and the first quarter of 2023. Therefore, it’s difficult to make strong pronouncements. Still, if Cipher operates anything like crypto platform Coinbase (COIN), investors could be looking at a wild ride.
In 2020, Coinbase posted about $1.28 billion in revenue. The following year – after the crypto sector soared to record valuations – the enterprise rang up $7.84 billion in sales, a blistering haul. However, in 2022, when the Fed began aggressively implementing a hawkish monetary policy, sales fell sharply to $3.19 billion.
Moreover, on a trailing-12-month basis, Coinbase is looking at $2.8 billion in revenue. It might perform better in Q2 but that’s also the point – COIN stock needs the underlying crypto market to cooperate. If it doesn’t, shares could tumble.
To be sure, it’s difficult to tell with certainty whether CIFR stock will correct from here given the current strong momentum. However, with the broader fundamentals (i.e. higher interest rates) possibly about to cloud the crypto narrative, Cipher seems unusually risky. So, let the buyer beware.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
