Did the launch of the Bitcoin ETF negatively impact the Bitcoin miners stocks?

Has the big picture changed for the Bitcoin miners?

Last year we started looking at the Bitcoin miners stocks as a leveraged play on Bitcoin. Quickly it became apparent that the number one risk to our investment thesis was the introduction of spot Bitcoin ETFs that would siphon inflows from the miners.

Now that the first spot Bitcoin ETFs have launched it is time to evaluate the damage and see if the Bitcoin miners are still a good investment idea.

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Did the launch of the Bitcoin ETF negatively impact the Bitcoin miners stocks?

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 inflow 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

Yes the launch of the spot Bitcoin ETFs is having an effect on the miners. And yes it is a negative effect for the first few days of trading. 

But whether this is a knee jerk reaction or the start of new epoch is impossible to tell. Too early. 

The main thing we need to track is the correlation between BTC and the miners. If they trend lower this is a very bad sign.

The second thing we need to track is the performance of the miners relative to BTC. In the first few days of trading it doesn’t look good. But again, it’s early.

One thing is sure, if you are looking to buy the miners a lot of them are currently undervalued with respect to Bitcoin. 

How did the miners react to the ETFs launch?