In the last 12 months, the Bitcoin (BTC) price against the US Dollar has increased by 900%. However, the stock prices of the 4 largest publicly-traded Bitcoin mining companies have increased by 5,000% during the same period. This phenomenal rise in these leading BTC mining stocks has taken place despite the fact that they are operating at losses.
Leeor Shimron, Fundstrat’s vice president of digital asset strategy, has shared his analysis about the largest four publicly-traded mining companies (Marathon Digital Holdings, Riot Blockchain, Hive Blockchain, and Hut 8) during an interview at CNBC. Each of these 4 companies’ market cap is above US$1-billion.
Shimron found out during his analysis that there is a “high positive correlation” between Bitcoin’s (BTC) price rise and the average return of the stocks of these BTC mining forms. He concluded that for every 1% increase/decrease in the price of Bitcoin, the average return of the Bitcoin mining stocks increases/decreases by 2.5%. So, their stock price will either increase or decrease with more than twice the aggression of Bitcoin (BTC) during bullish or bearish market conditions.
This wild volatility in the BTC mining stocks is attributed by Shimron to the lack or absence of regulated crypto investment products such as ETFs in the US. He went on to say that such speculation on Bitcoin mining stocks would continue “until a Bitcoin ETF is approved, investors may view public mining companies as one of the only ways to get exposure to Bitcoin...Since the primary source of revenue is Bitcoin, these companies are fundamentally long [on] the industry - so investors are essentially making a ‘picks and shovels’ bet when they invest in miners.”