Bitcoin miners: is it all about revenues?

Bitcoin miners report, July 2024

The gap is closing between Bitcoin and the Bitcoin miners. 

Is it because the miners are rising or because Bitcoin is falling? Well it is a little but of both. 

So there is still nothing to celebrate. But the miners trade is not dead. 

Are we just a revenue spike away from getting what we need?

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Bitcoin miners: it isn’t all about revenue

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.

The takeaway

Bitcoin miners stocks are currently outperforming Bitcoin over the past 12 months, but not to the extent expected based on previous bull markets.

The miners underperformance during the ETF-driven Bitcoin rally has put them behind expectations.

Historically miners aggregate revenues have increased cycle over cycle, despite halvings reducing Bitcoin rewards. However, changes in miners revenues alone do not strongly explain variations in their stock returns. The relationship between revenue changes and stock returns exists but is not as significant as might be expected.

The primary driver of miners stock outperformance is likely buying pressure from investors seeking alternative Bitcoin exposure, rather than fundamental business improvements.

For the miners trade to succeed as anticipated, Bitcoin needs to regain momentum.

The miners are holding up