How many Bitcoin miners should you bet on?

Bitcoin miners report, September(ish) 2023

Betting on the Bitcoin miners is one of the few ways you can stack an asymmetric bet on top of another asymmetric bet.

The miners follow Bitcoin’s large moves, but due to their small size they also return multiple times the growth of BTC over the same period.

The only problem is, which miner stock are you going to bet on? Or looking at it differently, how many miners stocks should you bet on at the same time?

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How many Bitcoin miners should you bet on?

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

The Bitcoin miners have had a rough month of August. As you can see on the table below a lot of them are down to half of their peak this year.

Year-to-date though the miners on average have returned 3 times as much as Bitcoin. More of that to come if you can wait a few years.

Given that there isn’t much to say about performance today we are focusing on portfolio selection. If you go through the analysis we make below you will:

• Understand the tradeoff you make by betting on a larger or smaller pool of miners.

• Have some heuristic to choose the appropriate number of miners to select based on what you expect from the market.

So let’s dive in.

Selecting miners: what’s the tradeoff?

Here is the situation:

• You have decided to invest in the Bitcoin miners.

• You have a fixed amount of capital to deploy on this bet, say $1 million.

• How many miners should you buy? How should you split your capital?

Maybe your first reflex is to say “just buy them all”! 

Hold on cowboy.