Hard time for the Bitcoin miners: is the investment thesis breaking down?Bitcoin miners report, March 2024
In the first month after the launch of the ETFs the Bitcoin miners were doing fine. No stellar performance but at least there was no break down in the expected pattern of correlations. That's changing and not for the better. What's the state of play? Is it a great buying opportunity? Or is our investment thesis dead in the water? The Ecoinometrics newsletter gives you insights from crypto and macro data to help you make better investment decisions. We spend hours every day gathering data, creating metrics and bringing them to life with data visualizations that allow you to quickly get to the heart of things. We then distill all that knowledge in each issue of the newsletter with less words and more charts so that you get insights, direct to the point, in five minutes or less. Join more than 21,000 investors here: Done? Thanks! That’s great! Now let’s dive in. P.S. we have just released a new dashboard on the Bitcoin miners. The purpose of this dashboard is to track if the Bitcoin miners stocks are over priced or under priced relative to Bitcoin. Paid subscribers can check it out here. Hard time for the Bitcoin miners: is the investment thesis breaking down?The Bitcoin miners thesis is simple. The profitability of the Bitcoin mining companies strongly depends on Bitcoin's price. That make the Bitcoin miners stocks closely tied to BTC and thus good proxies for getting exposure to the Bitcoin market. At the same time those miners stocks are small. Much smaller than Bitcoin. So capital inflows in the miners market tend to create outsized returns. The investment thesis is that in the coming bull market, the institutional money will want to own Bitcoin miners stocks in order to get exposure to BTC. The buying pressure coming from that demand will make it so that the Bitcoin miners stocks will deliver returns that are several times larger than Bitcoin itself over the same period. This is the bet we are tracking in our monthly miners report (since May 2023). The takeawayTwo months after the launch of the ETFs we can see a decline in the correlation strength between the miners and Bitcoin. But this decline is not dramatic for all the miners. Actually a few of them like Marathon or CleanSpark are barely affected. So while the ETFs are stealing liquidity from the miners (they are a second rate proxy now) the miners thesis is still alive. There are good reasons to think the weakness of the mining sector is only temporary. That means the current setup is a buying opportunity if you are not on this trade yet. Now let’s get into it in more details. A break down in trend correlation... Continue reading this post for free, courtesy of Ecoinometrics.A subscription gets you:
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Wednesday, March 13, 2024
Hard time for the Bitcoin miners: is the investment thesis breaking down?
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