As the cryptocurrency market experienced a notable downturn, mirroring the drop in U.S. equity markets during Tuesday’s trading session, bitcoin mining stocks bore the brunt of the sell-off.

The U.S. Federal Reserve commenced its two-day policy meeting, with expectations tempered regarding the possibility of interest rate cuts in the near future. JPMorgan equity strategist Marko Kolanovic noted a shift in expectations, now projecting the first Fed rate cut to occur in November, following a stronger-than-expected May jobs report.

Amidst this backdrop, bitcoin's price saw a significant decline, dropping by 5.5% to $66,196.38 over the past 24 hours, according to data from The Block’s bitcoin price tracker.

Among bitcoin mining stocks, Hive Digital Technologies (HIVE) led the decline, with its stock down 8.3% at the time of publication, as reported by Yahoo Finance. This was followed by Hut 8 (HUT), Cleanspark (CLSK), Riot Platforms (RIOT), and Marathon Digital (MARA), all experiencing declines of over 5%.

MicroStrategy (MSTR), a data and software company that has pivoted to become primarily a bitcoin holding company due to its significant BTC position, also saw its stock decline by 6%. With holdings of 214,278 bitcoins valued at approximately $5 billion, MicroStrategy's stock performance closely tracks movements in the price of bitcoin.

As the price of bitcoin fell, open interest in bitcoin futures markets surged to over $1.5 billion, signaling a “high-risk situation,” according to one analyst.

In contrast to the broader decline in the sector, shares of Iris Energy (IREN) demonstrated resilience, trading higher by 10%. Over the past month, the stock has surged by nearly 130%.

The positive momentum for Iris Energy comes amidst recent developments in the bitcoin mining sector. Last week, bitcoin miner Core Scientific (CORZ) announced a series of 12-year contracts with AI Hyperscaler CoreWeave, projected to generate a cumulative revenue of $3.5 billion. This news was particularly beneficial for Iris Energy, which was an early adopter of high-performance computing technology.

JPMorgan analysts highlighted the significance of this development, noting that hyperscalers and AI firms are increasingly exploring alternatives, including leasing power/datacenter capacity from bitcoin miners. With U.S.-listed miners alone drawing up to 5GW of power and access to an additional 2.5 GW through power purchase agreements, they represent an attractive target for such collaborations.

As the market continues to navigate through uncertainty, the divergent performance of bitcoin mining stocks underscores the evolving dynamics within the sector and the opportunities emerging from strategic partnerships and technological advancements.