Last month our Bitcoin miners reports painted an optimistic picture. Bitcoin was flirting with a breakout, and miners were riding the wave. Many miners had even managed to become fairly priced relative to Bitcoin again. However, the anticipated BTC breakout failed to materialize, causing miners to slip out of the mean reversion season. Today, we'll examine this situation and explore your best options for exiting this trade gracefully if you're growing weary of waiting for Bitcoin to take off. 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 23,000 investors here: Done? Thanks! That’s great! Now let’s dive in. The Bitcoin Miners: Exit Smoothly or Wait For MomentumThe 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. The TakeawayThe Bitcoin miners have underperformed Bitcoin when we take May 2023 as a reference. They haven’t done badly, but they haven’t performed as well as we want them to. If you are tired of waiting, or if you are worried about what a recession could do to those miners stocks then you might want to consider an exit strategy. The strategy that makes the most sense is a transition from a miners position into a Bitcoin position based on a relative price analysis. But that would be exiting the trade before we have seen the Bitcoin mania phase of the cycle. This is the phase where the miners really outperform in the previous cycle. Your call. Lagging Behind in Total Returns... Unlock this post for free, courtesy of Ecoinometrics.A subscription gets you:
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Wednesday, August 14, 2024
The Bitcoin Miners: Exit Smoothly or Wait For Momentum
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