The cryptocurrency mining market is very hot. Despite the recent losses recorded by companies, their shares have recorded strong appreciations in the last 12 months, surpassing even Bitcoin.
The information was released by Leeor Shimron, vice president of digital assets at the analysis house Fundstrat. He released his analysis during an interview with CNBC this past weekend.
According to Shimron, the price of Bitcoin has appreciated by 900% in the last 12 months. On the other hand, the main miners in the sector saw gains of 5,000% in the same period.
In his analysis, Shimron took into account the four largest Bitcoin miners listed on exchanges. Together, they have a market value of more than BRL 5 billion:
*Marathon Digital Holdings (NASDAQ:MARA);
*Riot Blockchain (NASDAQ:RIOT);
*Hive Blockchain (TSXV:HIVE);
*Hut 8 (TSX:HUT).
Bitcoin and miners maintain a 1 to 3 ratio
For the executive, the results confirm the positive correlation between mining and the price of Bitcoin. However, the appreciation of the shares was even more expressive.
Riot Blockchain was the one that presented the best results. Its shares have soared 9,000% in the last 12 months – a valuation 10 times greater than that achieved by Bitcoin.
Hut 8 had the smallest disparity, with a rise of “only” 1,200%, 300 percentage points less than Bitcoin.
Shimron concluded that for every 1% increase in Bitcoin, mining stocks appreciate 2.5% on average. That is, the gains represent a 3 to 1 ratio in favor of mining companies.
However, the same correlation applies to bearish moves. Mining stocks tend to drop 2.5% for every 1% Bitcoin drop at these times.
Lack of regulation increases volatility
Despite strong gains, the Bitcoin mining stock market is experiencing strong volatility. And for Shimron, part of that is the lack of regulation.
In the researcher's words, the absence of regulated funds and ETFs leaves investors with few options. Thus, they seek out mining companies as a way to expose themselves to Bitcoin.
“Since the main source of revenue is Bitcoin, these companies are fundamentally bought in Bitcoin. So investors are essentially placing a bet on it when they invest in miners. Until a Bitcoin ETF is approved, investors may see listed mining companies as one of the only ways to gain exposure to Bitcoin,” he explained.
He also cited the case of Coinbase, which is preparing to be listed on the stock exchange. In recent rounds, the company's market value has surpassed that of Itaú, the largest Brazilian bank.
“(Coinbase shares) trading at a valuation of around $100 billion on private markets. Clearly there is investor appetite for exposure within the cryptocurrency space, and miners are just another segment within that.”
