The stock prices of the top publicly-listed Bitcoin mining firms in the US have outperformed Bitcoin (BTC) by an average of 455%, according to Fundstrat Vice President of digital asset strategy, Leeor Shimron. Cited by CoinTelegraph, Shrimron told CNBC that the outperformance comes even as the firms have been operating at losses.
The ‘top’ Bitcoin mining firms include the largest firms in the industry. These are Marathon Digital Holdings, Riot Blockchain, Hut8 and Hive Blockchain. Each of the companies has a total market capitalization of over $1 billion.
Shimron found that each time that BTC’s price moves by a margin of 1%, the stock price of the mining firms moves by an average of 2.5%. This has been true for both upward and downward movements in the price of BTC. Therefore, as Bitcoin’s price has gained roughly 900% over the past 12 months, the stock prices of the mining firms have grown by some 5000%.
However, Shimron noted that the drops in stock prices will likely be more severe than drops in Bitcoin prices if crypto markets turn sour. “They’ll probably be hit hard as Bitcoin draws down,” he told CNBC.
“They’ve Made a Huge Capital Investment and Operate at a Loss to Position Themselves for the Current Bull Run.”
What could be causing the popularity of Bitcoin mining firms to rise so quickly? Shimron believes that it may have something to do with the lack of regulated crypto investment products available in the United States. Shimron specifically mentioned the lack of a Bitcoin ETF: “until a Bitcoin ETF is approved, investors may view public mining companies as one of the only ways to get exposure to Bitcoin.”
Citing the fact that “[Coinbase’s shares are] trading at a roughly $100 billion valuation in the private markets,” Shimron said that investors are clearly hungry for regulated opportunities to invest in crypto. “Clearly, there is investor appetite to gain exposure to operators within the crypto space, and miners are just another segment within that.”
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In addition, Shimron noted that the four largest publicly-listed mining companies may have a technological advantage over smaller mining firms within the space. He said that as the COVID-19 pandemic disrupted supply chain flows around the globe, these mining firms were some of the only ones that were able to stock up on the latest mining hardware. For example, Bitmain’s Antminer S19 series.
This is why these firms are operating at a loss. “They’ve made a huge capital investment and operate at a loss to position themselves for the current bull run,” Shimron explained.
“By building up their cash rate capacity and increasing their operating leverage, they effectively shield themselves from competition amongst new miners. So they’ve increased their economies of scale to retain market share, and I believe that should pay dividends going forward.”
Institutional Hunger for Regulated BTC Investment Products
Because investors’ appetite for regulated Bitcoin investment products seems to be so high, a number of analysts believe that a US Bitcoin ETF could have a serious impact on the price of Bitcoin.
Diogo Monica, President of federally-chartered crypto bank Anchorage, recently told Finance Magnates that: “I still think that there’s going to be a major impact in the United States when a Bitcoin ETF comes to the US.”
Because of the level of cryptocurrency industry infrastructure that is currently available, Monica said that he “wouldn’t be surprised if we get an ETF in the United States at some point soon.”