Many leading public bitcoin mining companies are operating at a loss, but this does not prevent their shares from outperforming the cryptocurrency in terms of growth. Lior Shimron, Vice president of Digital Asset Strategy at Fundstrat, shared his observations with CNBC.
The analysis included four major bitcoin mining companies whose shares are listed on the stock market: Marathon Digital Holdings, Riot Blockchain, Hive Blockchain and Hut 8. Each of them has a capitalization of more than $1 billion. According to Shimron’s observations, over the past year, the average return on investment in shares of mining companies was 5,000%, and in bitcoin-900%. Such stocks showed a high positive correlation with bitcoin, and their beta, that is, the volatility of returns relative to the broader market, fluctuated by an average of 2.5% for every 1% of the cryptocurrency.
The analyst notes that this correlation manifests itself both on the rise and on the decline. Thus, a change in the bitcoin trend to a bearish one may mean that the rate of decline in miners ‘ shares will exceed bitcoin’s own indicator several times. “Perhaps they will suffer more than others amid the fall of bitcoin,” he said.
Shimron explains the investors ‘ interest in the shares of mining companies due to the lack of regulated products for investing in cryptocurrencies in the United States. “Until the Bitcoin ETF is approved, investors may consider public mining companies as one of the few ways to gain access to bitcoin. Since their primary source of income is bitcoin, these companies are fundamentally putting a long shot at the industry. Investors, in fact, bet on “picks and shovels” when investing in miners, ” he added.
As another manifestation of this kind of interest, the analyst singled out the StagexBit exchange, the estimated capitalization of which in the closed market at certain points rose above $5 billion. “Investors clearly have an appetite for operators in the cryptocurrency space, and miners are just entering one of its segments,” he said.