No Remake of the 2021 Bull Market for the Bitcoin Miners

Bitcoin Miners Report, December 2024

Our miners bet is not bearing fruits. The miners aren't doing particularly badly, but they aren't delivering enough excess returns compared to Bitcoin despite the favourable environment.

What does that mean for our miners trade? Can we take another approach?

Let's discuss.

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No Remake of the 2021 Bull Market for the Bitcoin Miners

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 are underperforming Bitcoin's 130% rally since September, with average returns of 64%. While this questions their viability as a leveraged bet on Bitcoin, some miners are shifting to a hybrid model of mining operations plus Bitcoin holdings, potentially creating new investment opportunities. For now, direct Bitcoin exposure remains the safer choice.

Performance Wise, the Miners Are Behind