For some investors, owning individual bitcoin mining equities can be a double-edged sword. On one hand, these stocks, like bitcoin itself, can be volatile and prone to significant percentage moves in short time frames.
On the other hand, it is those crypto correlations that make the stocks more-than-adequate proxies on the cryptocurrency itself while supporting the long-term case for ETFs like the CoinShares Valkyrie Bitcoin Miners ETF (WGMI ). And that’s particularly so for risk-tolerant investors.
Indeed, WGMI and related ETFs have endured whipsaw price action of late. But there’s a silver lining. Bitcoin mining stocks, including WGMI member firms, are becoming less expensive to own.
WGMI Offering Discounts
In a recent report, JP Morgan analysts Reginald Smith and Charles Pearce note that from the end of February though last Friday, the 13 publicly traded crypto mining equities tracked by the bank — a universe including WGMI holdings — shed a combined $3 billion in market capitalization.
“U.S.-listed miners are now trading at just 1.35x their proportional share of the four-year block reward [opportunity. This marks] the first time in nearly a year that valuations have fallen below the 1.7x historical average since January 2022,” reported Benzinga, citing the JPMorgan analysts.
The bank also lowered its estimated premium on miners’ notional value of held bitcoin to 1.5×. The standard has long been 2×. That’s derived from the multiple often assigned to Michael Saylor’s Strategy (MSTR). That is the largest corporate owner of bitcoin. That stock is not a WGMI holding.
During the period covered in the JPMorgan note, the miners hashrate, which gauges daily profitability, was unchanged. More recently, there’s been evidence the hashrate is rebounding. That could augur well for WGMI member firms’ first-quarter top-line growth.
“The hashrate refers to the total combined computational power used to mine and process transactions on a proof-of-work blockchain, and is a proxy for competition in the industry and mining difficulty,” according to Coindesk.
Although JPMorgan recently trimmed its price targets on some bitcoin miners, it maintains “overweight” grades on some, including some WGMI holdings. One of the names the bank is constructive on is Iris Energy Ltd. (IREN), which is a WGMI member firm. The bank upgraded that stock to “overweight” from “neutral,” with a price target that implies potential upside of about 70%.
For more news, information, and analysis, visit the Crypto Channel.
