Are the miners cheap relative to Bitcoin?

Bitcoin miners report, December 2023

The Bitcoin miners are valued relative to Bitcoin's price. That's not the only factor for sure. Operational efficiency also plays an important part. But Bitcoin's value is a major driver in the stock price of those miners.

That means relative to Bitcoin the miners can be overpriced or underpriced. If you are managing a portfolio that contains both Bitcoin and its miners this is some information you'll want to know for optimal allocation.

And as a bonus, we can use this relation to estimate the range of miners growth when Bitcoin hits $100k…

This is a follow up to our research note on the state of Bitcoin's correlations from last week.

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Are the miners cheap relative to Bitcoin?

The Bitcoin miners stocks are tracking BTC pretty closely, with small market caps and a big pool of institutional buyers wanting exposure to Bitcoin. That makes them good asymmetric bets for when Bitcoin is on the rise. This is the investment thesis we track every month in the Bitcoin miners report.

Checkout these past issues of the miners report if you are catching up:

• The miners thesis.

• Creating a miners basket.

• The ETF risk.

The takeaway

The relationship between Bitcoin's price and the miners stock is strong. Only Stronghold and Argo have a relatively poor fitting. Others Marathon and Riot are following BTC extremely closely.

That makes those relations a powerful tool for pricing the miners.

As of today five miners are clearly underpriced relative to Bitcoin: Digihost, HIVE, TeraWulf, Stronghold and Hut 8. If you are thinking about deploying capital you should look at these first.

But looking at a longer time horizon, if those price relations hold when Bitcoin moves towards $100k per coin then from today's price you can expect an average of 15x returns. That’s on on average 6x more than what you'd get with Bitcoin.

Another sign that it is worth studying this space.

Now let's look at the details.

How are miners prices related to Bitcoin?