Galaxy analysts believe that unless mining companies can generate strong positive cash flow, they may still not be favored by investors compared to Bitcoin spot ETFs.
Review of the last halving: More than half of mining companies outperformed Bitcoin
Mining company stock prices have not kept up with Bitcoin
Investors long on Bitcoin ETF and short mining company stocks?
Review of the last halving: More than half of mining companies outperformed Bitcoin
The rise in mining company stock prices during the last bull market far exceeded that of Bitcoin.
Looking back at the trend after the Bitcoin halving in 2020, the rise in mining company stock prices was quite fierce, and the rise in Marathon Digital Holdings (MARA) was even more astonishing, seemingly unaffected by the potential impact of the halving on mining company earnings.
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Trend of mining companies after the 2020 halving | Daily chart
Mining company stock prices have not kept up with Bitcoin
Mining company stocks have always been seen as an indirect way to invest in Bitcoin. Perhaps it is the larger size of traditional investors that has led to their rise exceeding that of Bitcoin. However, this situation seems to have changed after the launch of Bitcoin ETFs.
As of December last year, Marathon (628%) and Bitfarms (577%) still outperformed Bitcoin in terms of annual gains.
However, after the approval of Bitcoin ETFs, Bitcoin continued to hit new all-time highs, while mining company stock prices remained far below their previous highs. The Valkyrie Bitcoin Miners ETF (WGMI), which tracks the performance of listed mining companies, also fell by about 21%.
Trend after August 2021 | Source: @WolfieZhao
Investors long on Bitcoin ETF and short mining company stocks?
Research institution Galaxy pointed out that, similar to the previous positioning of mining company stocks, almost any US brokerage client can access Bitcoin ETFs without going through cryptocurrency exchanges.
Galaxy mentioned in its report:
Retail investors may still buy mining stocks, but for institutional investors, shorting mining stocks becomes the preferred trading strategy. In the short term, institutions seem more likely to go long on Bitcoin ETF and short mining stocks. We have seen this situation since early 2024.
Galaxy analysts believe that mining companies may still not be favored by investors unless they can generate strong positive cash flow.
The disconnect between Bitcoin and mining company stocks seems to imply a difference in this bull market.
A recent mining report from asset management company CoinShares also pointed out that with the uncertainty brought about by the Bitcoin halving, competition among mining companies will intensify, and only 5 companies may be able to profit and continue operating.
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CoinShares Report: Mining costs after Bitcoin halving at $37,800, only 5 mining companies can profit
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MARATHON DIGITAL HOLDINGS
Bitcoin spot ETF
Mining companies
Further reading
Bitcoin reaches $69,000, spot ETF trading volume reaches billions of dollars, hitting new all-time highs
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