Spot Bitcoin ETFs are coming, is it still time to buy the miners?

Bitcoin miners report, October 2023

It looks like BlackRock (and a slew of other firms) is finally going to launch a spot Bitcoin ETF in the US. That’s a blessing for Bitcoin and a curse for the Bitcoin miners. Or is it?

The real question is how does the increase likelihood of a BTC ETF during the next bull run affect the risk/reward ratio of the Bitcoin miners thesis. 

Here is my take.

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Spot Bitcoin ETFs are coming, is it still time to buy the miners?

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.

Takeaway

I have mentioned before that in my opinion the introduction of a spot BTC ETF is the biggest risk on the miners thesis. 

If institutional money has more options to get direct exposure to Bitcoin, it is possible less money will flow to the miners. That will result in less growth.

There are scenarios under which a Bitcoin ETF is neutral-to-good for the miners, we are discussing the idea below. But if you are thinking in terms of risk/reward ratio, there is a risk that the reward will end up smaller than expected.

To decide whether or not the trade is for you, you need to think in terms of margin of safety. Less money flowing to the miners means less upside. And the smallest upside you are going to get during a real bull run is the amount of growth it takes to make a new all-time high. 

On average this growth is currently a 10x, compared to a 2x for a pure Bitcoin bet. 

Know which number makes sense for your investment goal and make your decision based on that.

Spot ETF vs the miners: margin of safety