Bitcoin mining stocks have outperformed bitcoin itself this year; they’re up over 20% versus spot BTC, which is down 11%.
What is causing the current divergence between crypto and crypto mining performance? Bitcoin mining is not just about crypto mining anymore; it’s also about AI infrastructure, as more and more data centers become dual-usage facilities. As a result, the market increasingly values miners based on their AI-related revenues, as opposed to just their bitcoin production.
Bitcoin miners are in control of large-scale infrastructure and data center assets, which are seeing high demand from hyperscalers and for AI infrastructure needs. Converting mining capacity for AI and other computing applications not only unlocks new revenue streams and long-term contracts. It also helps diversify crypto price volatility. Bitcoin still matters to crypto miners, but given its current price weakness, AI-related demand is currently taking precedence.
In financial terms, bitcoin miners have optionality, a phrase coined by Nassim Taleb, meaning they are positioned to benefit from volatility. In this case, optionality provides miners with limited downside protection, while maintaining maximum upside potential.
ETF Plays
Two pure-play ETFs in this category focus explicitly on crypto mining. The CoinShares Bitcoin Mining ETF (WGMI ) was the first of these and is the largest, with approximately $300 million in assets under management. Year-to-date, the ETF is up almost 30%. Meanwhile, the Grayscale Bitcoin Miners ETF (MNRS ) is up 20% YTD, but holds only $12 million in assets.
There are many other crypto-economy and blockchain ETFs with crypto mining exposure as well. These include the Bitwise Crypto Industry Innovators ETF (BITQ ), which has an allocation of at least 85% to “pure-play” crypto companies. This ETF is up 23% for the year and has $450 million in assets.
In the blockchain ETF category, there is the leader of the pack, the Amplify Blockchain Technology ETF (BLOK ), which has almost $1.2 billion in assets, serving as a more diversified play on this theme. Despite an April performance spurt of 20.9%, it is only up 5.6% YTD. But over time, since its inception in 2018, it has weathered many a crypto winter. BLOK remains a standout ETF in the blockchain category with a 5-star Morningstar rating.
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