The future of Bitcoin mining stocks

Jan 22, 2024

Crypto markets have performed sleepily at best after mass approval of bitcoin exchange traded funds in the United States earlier this year. Volatility plummeted. Bitcoin dropped nearly twenty percent. And mining stocks also receded

But looking past short-term market effects, what could be the future of previously popular speculative instruments from the pre-ETF era? Mining stocks were a well-known vehicle for investors to get access to crypto without being able to trade a proper spot ETF. With ETFs approved, the future investor interest for mining stocks is debated. 

Here are three reasons why the debate should not settle on the side of “investors won’t care about mining stocks anymore.” 

First, mining stocks are like altcoins. With lower liquidity, more volatility, and historically outsized returns (in both directions), mining stocks have always been a beta play for bitcoin. This is true even for investors who have access to every crypto market, from 100x leveraged futures to ETFs through their brokerage accounts. Some investors will rotate funds out of mining stocks into the “real thing” of a Bitcoin ETF. But the beta of mining stocks will not evaporate. 

Second, some investors will always care about picks and shovels. When gold ETFs were introduced in the early 2000s, investors did not suddenly abandon publicly traded gold mining and exploration companies. The gold investor simply had more options for investing in a more mature market. A similar effect can be expected for the bitcoin market.

Third, winners still need to be chosen from the mining cohort. Compared to other technology and commodity industries (bitcoin mining sort of spans both), the crypto mining sector is still very young. Investors still have abundant opportunities to pick winners and losers from the cohort of existing mining companies, and bitcoin ETFs do not change this dynamic at all. 

Of course, some American investors owned mining stocks because there were no spot bitcoin ETFs. But some American investors also invested in NFTs, MicroStrategy, and Dogecoin for similar reasons. Those funds that were waiting for ETFs can not rotate to those products, but many of the core theses that would cause investors to own mining stocks remain unchained. 

The future is bright for bitcoin mining and mining companies, public or private.

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