Ecoinometrics - The Bitcoin miners are delivering returns

Bitcoin miners report, July 2023

Sometimes you cannot buy Bitcoin directly. Maybe you can’t for regulatory reason or maybe because you don’t want to be your own bank.

In that situation, if you still want exposure to Bitcoin, you have the option of buying stocks whose growth is expected to follow BTC. The Bitcoin miners are in this category. And so is MicroStrategy while we wait for a spot Bitcoin ETF in the US.

But the miners aren’t simply a way of tracking Bitcoin, they are delivering leverage. And oh boy did they deliver over the past three months!

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Bitcoin miners report, July 2023

The takeaway

Since we started looking at the Bitcoin miners as a serious investment opportunity back in May Bitcoin is up about 10%. Meanwhile the miners are up more than 30%. 

This is exactly the kind of pattern we expect: the miners in aggregate should return several times Bitcoin gains over the same period due to a size effect and institutional inflows.

In a previous report on the miners we had singled out a subset of stocks that we think have the potential to deliver outsized returns compared to Bitcoin during the next bull cycle: Hut 8, HIVE, Bitfarms, Digihost and Cleanspark.

Since then those stocks have return an average of 41% (vs 30% for the other miners) with a 3.6 multiple over Bitcoin’s return (vs 2.6x for the others). 

Overall that’s a good start but of course this bet is at a 5 years horizon so we have time to see and there will be other occasions to enter the market.

In this report we’ll dig into:

• The recent performance of the miners.

• The correlations between the miners and Bitcoin.

• The evolution of the financial results of the miners.

• The insiders trades for those mining stocks.

But first let’s do a quick recap of the strategy.

The strategy

We covered in more details the reasons you’d want to invest in the miners as opposed to Bitcoin here and here. But here is the tl;dr version.