Are Mining Company Stocks Being Replaced? Research Institutions Indicate Investors Are Going Long on Bitcoin ETFs and Shorting Mining Company Stocks

Galaxy analysts believe that unless mining companies can generate strong positive cash flow, they may still not be favored by investors compared to Bitcoin spot ETFs.

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Review of the last halving: More than half of mining companies outperformed Bitcoin
Mining company stocks have not kept up with Bitcoin
Investors long Bitcoin ETF and short mining company stocks?
Review of the last halving: More than half of mining companies outperformed Bitcoin
The rise in mining company stocks during the last bull market was much higher than that of Bitcoin.

Looking back at the trend after the Bitcoin halving in 2020, the rise in mining company stocks was quite fierce, and the rise in Marathon Digital Holdings (MARA) was even more astonishing, seemingly unaffected by the potential impact of the halving on mining company earnings.

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Trend of mining companies after the halving in 2020 | Daily chart
Mining company stocks have not kept up with Bitcoin
Mining company stocks have always been seen as an indirect way to invest in Bitcoin, perhaps because traditional investors have a larger volume, resulting in higher gains than Bitcoin. However, this situation seems to have changed after the introduction of Bitcoin ETFs.

As of December last year, Marathon (628%) and Bitfarms (577%) still had higher annual gains than Bitcoin.

However, after the approval of the Bitcoin ETF, Bitcoin has surged to new historical highs, while mining company stocks are still far below their previous highs, and the Valkyrie Bitcoin Miners ETF (WGMI), which tracks the performance of listed mining companies, has also fallen by about 21%.

Trend after August 2021 | Source: @WolfieZhao
Investors long Bitcoin ETF and short mining company stocks?
Research institution Galaxy pointed out that, similar to the previous positioning of mining company stocks, almost any US brokerage client can access Bitcoin ETFs without going through a crypto exchange.

Galaxy mentioned in the report:
Retail investors may still buy mining stocks, but for institutional investors, shorting mining stocks becomes the preferred trade, and in the short term, institutions seem more likely to go long on Bitcoin ETFs and short mining stocks. We have seen this trend since early 2024.

Galaxy analysts believe that unless mining companies can generate strong positive cash flow, they may still not be favored by investors.

The disconnect between Bitcoin and mining company stocks seems to imply a difference in this bull market.

A recent mining report from asset management company CoinShares also pointed out that with the uncertainty brought by the Bitcoin halving, competition among mining companies will become more intense, and only 5 companies may be able to profit and continue operations.

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CoinShares report: Bitcoin halving brings mining cost of $37,800, only 5 companies can profit
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MARATHON DIGITAL HOLDINGS
Bitcoin spot ETF
Mining companies

Further reading
Bitcoin reaches $69,000, spot ETF trading volume reaches billions of dollars, reaching new historic highs
Too good to be true? Bloomberg: Wells Fargo, Merrill Lynch start offering Bitcoin ETFs