A healthy rise in its core cryptocurrency and several positive new analyst notes were the key factors sending Cipher Mining (CIFR -4.28%) stock higher in recent days. The Bitcoin miner was up by more than 9% week to date as of Thursday evening, according to data compiled by S&P Global Market Intelligence.

A boost from Bitcoin

After something of a slump in August, Bitcoin has generally been on the rise in the current month. The Federal Reserve’s rate cut on Wednesday was only the latest catalyst pushing the No. 1 cryptocurrency higher.

Prior to that, on Monday, analyst Michael Donovan of Compass Point assumed coverage of Cipher Mining, flagging it as a buy at a price target of $8 per share. The following day, Canaccord Genuity’s Joseph Vafi changed his take on the company by raising his price target substantially. He reset it to $13 per share from $9, maintaining his existing buy recommendation.

Vafi values Cipher Mining using a sum-of-the-parts method. One of its more valuable assets, in his opinion, is the Barber Lake facility. The analyst believes this mining operation is one of the most profitable in the cryptoverse, as it is extremely efficient and has relatively low power costs. The pundit also pointed to the 1,063 Bitcoin held by the company and its Black Pearl site as high-value holdings.

A happy surprise

It’s possible Cipher Mining is continuing to bask in the warmth of its second-quarter earnings, the results of which were published near the start of August. The company posted a surprise net profit (of $0.08 per share), which seemed to mitigate its significant revenue miss ($43.6 million reality versus the consensus analyst estimate of $50.6 million.

BigBear.ai (BBAI -3.35%) stock closed out this past week’s trading with another run of big gains. The software and services company’s share price climbed 23.5% from the previous week’s market close amid a gain of 0.6% for the S&P 500 index.

BigBear.ai’s valuation surged again this past week, as investors continued to place bullish bets on companies with artificial intelligence (AI) tools tailored for the defense industry. The company’s share price is now up 101% over the past month and 214% over the past three months.

BigBear.ai stock continues to surge despite no major news

Even in the absence of apparent meaningful developments for the business, BigBear.ai stock has continued to rally. The company’s big valuation gains appear to be primarily connected to the defense-AI investment trend that has been hot in the market.

Palantir has been a top defense-AI play and reached a new valuation high in this week’s trading, and BigBear.ai stock has often seen valuation moves that correspond with pricing action for the software leader. Some investors are betting that BigBear.ai could emerge as a Palantir-like winner as demand for AI-powered defense software continues to increase.

What’s next for BigBear.ai?

The massive valuation run up for BigBear.ai stock appears to be out of step with the company’s recent business performance and near-term outlook. Despite demand tailwinds in the AI industry, the company’s revenue increased just 5% year over year in the last quarter. Growth is expected to accelerate in the second half of the company’s current fiscal year, but management’s midpoint target for annual sales growth of roughly 7.5% still raises valuation concerns following recent gains for the stock.

While it’s possible that continued acceleration for sales growth and margin improvements will pave the way for BigBear.ai stock to see more explosive gains above its current valuation level, huge valuation gains in the absence of major news suggest that the company is a risky investment right now. Investors will get a closer look at the business on Aug. 11, when the company publishes its next quarterly report.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The Y2K bug never melted the global grid, yet the panic-buying of flashlights and canned beans in the last months of 1999 was very real. Today, central bank digital currencies (CBDCs) could be playing a similar role in a different fear cycle.

CBDCs are digital currencies issued and controlled by a central bank, combining the convenience of digital money with the potential for state oversight of transactions. Talk of state-issued, fully traceable (and controllable) digital money has some investors looking for a lifeboat, and the main beneficiary this time could be Bitcoin (BTC -0.78%).

If you think a large and fearful capital flight to Bitcoin driven by CBDCs is improbable in the near term, you aren’t wrong. Nonetheless, it’s undeniable that a centralized and government-controlled digital currency could threaten financial privacy in a way that encourages certain investors to hold their funds in another form. There’s already some evidence that at least a few people are buying Bitcoin for this reason. Let’s dig in and understand this trend a bit more so that you’ll be prepared if it continues to take off.

China’s CBDC push may be driving investors out

China’s recent push to expand its digital yuan pilot projects is both a technical experiment and a catalyst for Chinese investors seeking to safeguard their financial privacy by seeking alternative currencies like Bitcoin. It’s also a good example of how capital can behave in a way that’s beneficial to Bitcoin when central bankers start to posture regarding implementing CBDCs.

On April 23, the People’s Bank of China urged state-owned enterprises to prioritize using the yuan for cross-border payments; the digital yuan is likely going to be promoted next. That move sent a clear message: The Chinese government is accelerating control over money and its flows, thereby spurring underground over-the-counter (OTC) purchasing of Bitcoin in cities like Shenzhen and Shanghai as investors scrambled to move capital offshore.

The dynamic echoes early 2023, when the start of one of China’s digital yuan pilot programs coincided with a 72% surge in Bitcoin’s price from January to April, reflecting a classic flight to a perceived safe asset. With around 94% of central banks now exploring CBDCs, according to data from the Bank of International Settlements, the same impulse that’s driving Chinese investors to Bitcoin could very easily spread internationally.

Will the dollar go digital?

In the U.S., CBDC conversations are a mix of cautious exploration and staunch political resistance.

The Federal Reserve’s research into a digital dollar is ongoing. Yet on Capitol Hill, resistance is mounting. A bill reintroduced in late February seeks to bar the Fed from issuing a CBDC.

Furthermore, President Donald Trump’s executive order on Jan. 28 bans a “digital dollar” outright, but that could actually spur CBDCs in other countries, as they’ll be free to establish any norms they prefer for the currency category. So, U.S. investors aren’t exactly afraid of a new CBDC threatening their privacy or control over their funds. However, they could still capture the upside from investors in other countries buying Bitcoin to evade their nations’ CBDCs.

How far can the CBDC hedge push Bitcoin?

At the moment, capital flight into Bitcoin as a result of CBDCs is a trend that’s just starting to pick up. Still, it’s important to keep expectations in check here. Bitcoin probably can’t ever replace fiat currencies completely, whether they’re digitized or not.

Bitcoin’s supply is famously capped at 21 million coins. That scarcity can support price strength until the cows come home. But there are many technical hurdles to using Bitcoin as an actual currency rather than merely as a store of value. Everyday transactions are far too slow or too costly to be competitive with cash, even on throughput-specialized side chains like the Lightning network.

So while the CBDC debate may push Bitcoin higher to the extent it persists and intensifies, don’t expect a one-way rocket ride. Investors can count on a tailwind here as long as privacy fears persist. Still, there’s no wholly new reason to invest in Bitcoin any more than you’re already doing, unless you want to avoid using a CBDC in the future.