Despite the best publicly traded bitcoin mining companies operating at a loss, their share prices have dramatically surpassed BTC in the last 12 months.
At CNBC, Fundstrat’s Vice President of Digital Asset Strategy, Leeor Shimron, shared his analysis of the market performance of the four largest publicly traded mining companies – Marathon Digital Holdings, Riot Blockchain, Hive Blockchain and Hut 8, each representing a market cap of more than $ 1 billion.
Over the past 12 months, Shimron has found an average return on shares in mining companies of 5,000%, while BTC gained 900% over the same period. Not surprisingly, the stocks were found to have a “high positive correlation” with BTC.
The researcher concluded that for every 1% price movement in BTC, bitcoin mining stocks move on average by 2.5%. However, the observations cover both upward and downward price movements, which means that mining stocks are likely to decline during a bearish market situation with more than double the aggression of BTC.
“They will probably be hit hard as the bitcoins run out,” he said.
Shimron attributed the savage volatility in the miners’ supply to scarcity regulated crypto investment products in the United States, they speculate that “until the bitcoin ETF is approved, investors may see public mining companies as one of the few ways to get to bitcoin.”
“Because bitcoins are the primary source of income, these companies are fundamentally long.” [on] industry – so investors are basically betting on “picks and shovels” when investing in miners. “
Aware that Coinbase shares “trade in private markets worth about $ 100 billion,” Shimron added, “Obviously, the investor wants to gain exposure to crypto-space operators, and miners are just another segment in that.”
Shimron also noted supply chain disruption in the midst of a coronavirus pandemic, they benefited the four largest mining companies – which were able to supply themselves new generation hardware, for example the Bitmain Antminer S19 series.
“They have made a huge capital investment and are working at a loss to place themselves for the current bull run,” he said, adding:
“By building the capacity of its monetary rates and increasing its operating leverage, it effectively protects itself from competition among new miners.” So they increased their economies of scale to maintain market share, and I believe it should pay dividends in the future. “