Why Canaan Stock Dived by 9% on Monday

If the cryptocurrency market is stumbling, you can be pretty sure that crypto mining company and equipment supplier Canaan's (NASDAQ: CAN) stock is heading south too. That was the dynamic Monday, as investors traded out of Canaan and many other companies in the cryptoverse.

On the day, Canaan's stock fell by in excess of 9% while the bellwether S&P 500 (SNPINDEX: ^GSPC) inched 0.2% higher.

Bearish factors

All in all, cryptocurrencies like the main one Canaan mines -- Bitcoin -- have done exceedingly well this year. Rallies in any asset, of course, become more difficult to sustain as time goes by and valuations surge. Digital coins and tokens are particularly susceptible to this, as they are rightly considered to be comparatively high-risk investments.

Image source: Getty Images.

In recent days, risk-takers have had plenty to worry about on the macroeconomic and political fronts. President Trump's visit to China is only the latest event directly impacting the trade dispute between the two countries (and making the future of U.S.-imposed tariffs hard to predict, again).

Also, Federal Reserve (Fed) officials seem divided on enacting a rate cut this month, putting a fresh reduction at the Fed's next meeting in December in doubt. Lower interest rates tend to juice the value of risky assets, as they encourage investors to shift capital away from lower-yielding "safe" plays.

No longer the centers of attention?

Yet another factor is the Great Data Center rally associated with the powerful rise of investor interest in artificial intelligence (AI) stocks and related businesses (data centers need to be built, or expanded, to accommodate the comparatively heavy resource demands of AI). Canaan is involved in this business too, so it's taking hits too, as some judge these stocks to have run their course for now.

Eric Volkman has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.