While the largest listed bitcoin miners are losing money, their stocks have outperformed BTC significantly over the past twelve months.
On CNBC, Fundstrat VP of Digital Asset Strategy Lior Shimron shared his analysis of market performance to four of the largest listed mining companies – Marathon Digital Holdings, Riot Blockchain, Hive Blockchain and Hut 8, each representing over $ 1 billion in capital letters.
Over the last twelve months, Shimron found that the average return on mining was 5,000%, while BTC increased 900% over the same period. Not surprisingly, equities have a “high positive correlation” with BTC.
The researcher concluded that for every 1% increase in the price of BTC, bitcoin moves on average 2.5%. However, this observation applies to both price increases and downward price movements, which means that mining shares are likely to fall by more than half compared to BTC in a bear market.
“They are likely to be hit hard by the fall in bitcoin,” he said.
Shimron attributed the extreme volatility of mining stocks to the lack of regulated cryptocurrency investment products in the United States, suggesting that “until a Bitcoin ETF is approved, investors may view public mining companies as one of the only ways to get Bitcoin.”
“Since the main source of income is bitcoin, these companies are largely long in the industry, so investors mainly make ‘choices and choices’ games when investing in miners. ”
Shimron noted that Coinbase shares “trade close to $ 100 billion in private markets,” adding: “There is clearly a desire among investors to gain access to operators in the crypto space, and miners are just another part inside.”
Shimron also pointed out that supply chain disruptions in the midst of the coronavirus pandemic have been favorable to the four largest mining companies, which have managed to acquire next-generation equipment such as Bitmain’s Antminer S19 series.
“They have made large investments and are operating at a loss to get into the current bullish trend,” he said, adding:
“By increasing cash rates and operational influence, they effectively protect themselves from competition from new miners. So they have increased the economies of scale to maintain market share, and I think this should pay off in the future. “