Investments in shares of BTC mines, which are also publicly traded companies, recorded much higher returns over the past year than an investment in Bitcoin. What is the reason behind this?
Bitcoin lagging behind
October 1, 2020. The price of BTC opens the month with a value of $10,780. Less than a year has passed since then, and the leading cryptocurrency is struggling to maintain $42,000. This is a return of around 290%. This result is undoubtedly very good. However, when we look at the listings of some mining companies, much higher numbers appear to our eyes. The definite record holder is Marathon Digital Holdings (MARA). This North American company, gained on the value of its shares over 1640%. Canadian Bitfarms (BITF) can boast of a similar result. In turn, Hut 8 Mining (HUT) and Riot Blockchain (RIOT) increased by 1010% and 913% respectively.
Limited field of action for institutions to invest in cryptocurrency
The founder of Ecoinmetrics perfectly explains this situation. As he notes:
“It’s a bit like gold miners when physical gold was hard to come by in the old days. The game for these guys was probably to stay away from the bullion itself, focusing their attention on stock trading.”
These words find justification in the market situation of institutions, which very often complain about the lack of sufficient regulation to be able to invest in Bitcoin through its actual acquisition. Thus, they make purchases of shares of companies related to the crypto sector. Their investments thus become indirect, but nevertheless highly satisfactory.
This impasse has the power to change the approval on the US bitcoin ETF market. Green light for institutions in the matter of this kind of investments can lead to the transfer of capital from Bitcoin related companies to the fund based on it. It is speculated that this could happen as early as October. However, the conservative approach of U.S. regulators has the right to significantly delay this deadline.
Impressive cryptocurrency mining stocks
The value of mines is affected by two key components. The first of these is mining capacity, or the number of mining machines owned. In this case, according to an August report, Marathon received 21,584 mining machines from Bitmain and expects to receive another 5,916 units. The company is aiming for at least 133,000 units by the middle of next year.
The second component is the abundance of crypto wallets. Marathon boasts of holding as much as 6,695 BTC. At current prices of the leading cryptocurrency, this is more than $280 million. Such capital has the right to be a real driving force for the company’s development and, consequently, inspire optimism among investors.