Ecoinometrics - Is a spot Bitcoin ETF threatening the miners stocks?

Bitcoin miners report, August 2023

Up until now, betting on the miners to deliver returns that track Bitcoin but are several times larger has been a good play.

But is there is a non zero chance the SEC will approve a spot Bitcoin ETF within a year.

Is that a risk to the Bitcoin miners stocks?

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Is a spot Bitcoin ETF threatening the miners stocks?

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.

The takeaway

Bitcoin has bounced from the bottom of this bear market. It has even performed pretty well year-to-date (up 77% at the end of July).

And as expected most Bitcoin miners have performed really well.

We started tracking this bet in May and as of now:

• The miners we marked as high potential  for delivering extra returns compared to BTC are up 54% on average which is a 9.3 multiple over Bitcoin’s returns.

• The miners we excluded are up 53% on average for a 9.1 multiple over Bitcoin.

• Only Argo and Stronghold underperform.

Check out the results in the table.

Now, we are making a multi year bet on the miners. So three months worth of data is basically noise. Still it is good to see that our thesis is not invalidated.

But the biggest risk for this bet has yet to materialize. 

If a spot Bitcoin ETF is approved by the SEC institutional investors will have an easier time getting direct exposure to BTC. That would mean less inflow for the miners and likely smaller returns.

With this ETF now a distinct possibility that makes our investment thesis more risky. But if you are looking to generate returns in excess of BTC this is still a bet worth taking as long as you have clear upside target and know when to get out.

We discuss our take on this ETF risk below with a look back at what happened to the gold miners when the GLD ETF was introduced.

The ETF threat