Analysis: Discovering the Bitcoin Miner opportunity, as BTC passes $60,000
Spot Bitcoin ETFs amass $5.5B in net inflows, heralding crypto's mainstream acceptance.
Gm Fintech Architects —
We have a special treat for you today.
has been studying BTC miners and has delivered a fantastic industry analysis below. Follow him on X and LinkedIn.Summary: We look at the growth of Bitcoin in 2024, reaching a price over $60,000 again, with a special focus on Bitcoin miners. The industry has witnessed a revival led by the introduction of 11 spot Bitcoin ETFs by players like BlackRock and Fidelity, accruing $5.5B in net inflows in just six weeks. This resurgence is underscored by the performance of Bitcoin miners, with leading companies like Marathon Digital and Bitfarms outperforming Bitcoin returns by a multiple of 3.6x. The Bitcoin mining industry, currently valued at $25B, could see meaningful growth as a result. Amidst this growth, institutional ownership in Bitcoin mining companies has surged, reflecting a broader acceptance of digital assets. We look at the key players and highlight key metrics to watch.
Topics: BlackRock, Fidelity, Marathon Digital, Bitfarms, Bit Digital, Cipher Mining, Iris Energy, Ethereum, Phoenix Group, CleanSpark, Riot Blockchain, Exxon, Chevron, Shell
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Long Take
Bitcoin is Back
Finally. 2024 has been a watershed moment for digital assets, particularly Bitcoin. Our attention today will focus on the behind-the-scenes actors powering the network — Bitcoin miners.
It is hard to believe, but we are on the other side of the bear market. Let’s appreciate that, despite being only two months into the year, 2024 has already earned its place in finance history. Led by BlackRock and Fidelity, the industry rolled out *11* spot Bitcoin ETFs, which officially knights crypto as an alternative asset class within the asset allocation supply chain of the finance industry.
However, it is easy to underestimate just how much of an opportunity this is for asset managers. Just six weeks since SEC approval, the ETFs have seen an aggregate $5.5B in net inflows — $13B if you exclude the -$7.4B in outflows from GrayScale’s GBTC ETF — and $50B+ in cumulative trading volume. These results dwarf the launches of other major ETFs.
Unfortunately, a multi-year purge of bad actors (e.g., FTX, Celsius, Voyager, Genesis, 3 Arrows Capital) and an SEC humbled by the courts to engage constructively after numerous attempts to discredit the asset, were necessary to bring us to this point. The bear market tested both retail and institutional conviction, whereas 2024 brought about a reversal that has generated massive returns for correlated assets. This resurgence revitalized investor enthusiasm, in particular for Bitcoin proxies like miners, which trade at a high beta to the underlying.
The best-performing miners in 2023 were Marathon Digital (591%), Bitfarms (582%), Bit Digital (553%), Cipher Mining (546%), and Iris Energy (501%), to name a few. Taking the average return of the five, +554%, and Bitcoin’s +154%, miners overperformed BTC returns with a multiple of 3.6x. If Bitcoin achieves the $150,000 price target expected by analysts in the space, this would generate a 240% return in 2024 with an even higher potential return for miners.
The $100B+ Industry Potential
Similar excitement can be found for the Bitcoin mining industry, currently valued at $25B, or 2.10% of the Bitcoin market cap. Currently, the space is dominated by participants in the US, China, and Russia. Reminder that China had shut down 90% of its Bitcoin mining capacity and thereby opened the market up for the rest of the world — an unintended consequence of regulatory response.