Bitcoin (BTC) may have outperformed traditional financial markets in terms of return on investment, but cryptocurrency still lags behind the companies that mine it.
The price of BTC rose around 290% in one year, a period that rose from $ 10,695 to just over $ 42,000. By comparison, shares of Marathon Digital Holdings (MARA), one of the largest North American cryptocurrency mining companies, rose 1,641% over the same period.
An institutional spike
More cryptocurrency mining companies outperformed BTC’s spot price in terms of annual performance. For example, Canadian company Bitfarms (BITF) rose 1,736%, while Hut 8 Mining (HUT) and Riot Blockchain (RIOT) gained 1,010% and 913%, respectively, in one year.
Nick, founder of Ecoinometrics, a cryptocurrency-focused newsletter service, called mining stocks an “obvious choice” and noted that they offered institutional investors indirect exposure to the Bitcoin markets.
“I bet a lot of institutional investors haven’t looked into BTC spot trading, mostly for regulatory compliance reasons,” the analyst stated in an article published on Sept. 27, adding:
“It’s a bit like the gold diggers in the days when it was difficult to get physical gold. So the move for these people was likely to stay out of the spot market, but they are speculating in stocks.”
The statements came to light when Morgan Stanley reported on its securities files that it had doubled its exposure to Grayscale’s Bitcoin Trust (GBTC), a traditional investment vehicle for digital asset investors.
In particular, as of July 31, the Morgan Stanley Europe Opportunity Fund owned 58,116 shares of Grayscales Bitcoin Trust.
In July, Cathie Wood’s Ark Invest also bought more than 450,000 GBTC shares valued at around $ 1.4 million. In line with the performance of mining stocks, these investments showed an increase in institutional appetite for traditional investment products with an emphasis on cryptocurrencies.
Nick added that investors will continue to put their capital in cryptocurrency mining stocks until they see a viable alternative like an exchange-traded fund in the US.
Scaling and hodling
Demand for mining stocks is growing as most companies focus on two key perspectives: scaling and hodling.
For example, Marathon reported in its August unaudited report that it had received 21,584 latest-generation ASIC miners from Bitmain in 2021, adding that it was currently due to receive 5,916 more in transit. As a result, the company expects around 133,000 Bitcoin mining machines by the middle of next year.
Meanwhile, Marathon found that it currently owns 6,695 bitcoins, including the 4,812.66 bitcoins it bought in January 2021. As a result, the fair market value of Marathon’s current BTC holdings is now approximately $ 333.4 million, which will provide the company with ample capital to continue its productions in the future.
Similarly, Riot Blockchain’s August report showed a 451% year-over-year increase in bitcoin mining capacity, aided by its fleet of 22,050 miners with hash power of 2.2 exahash per second (EH / s). The company mined 441 BTC in August 2021.
Riot noted that it plans to have 25,650 Bitmain machines up and running by early September. It is currently building a new mining facility in Texas.
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