The universe of digital assets and related usage cases is expanding at a rapid rate. So are the investments offering exposure to that trend.
Add the VanEck Digital Assets Mining ETF (DAM) to that list. DAM debuted last week and as its name implies, the fund focuses on companies engaged in the mining of digital assets, including bitcoin. The newly minted exchange traded fund follows the MVIS Global Digital Assets Mining Index.
“Mining is the process by which new units of cryptocurrency are created. Miners use specialized computer chips in conjunction with software to solve complex math problems,” says VanEck product manager John Patrick Lee. “In solving these problems, transactions that exist in the current block are verified by multiple participants. As the problems are solved, miners are rewarded with newly issued cryptocurrency. Of the publicly-traded digital assets mining companies in the investment universe, the vast majority are focused primarily on mining Bitcoin.”
DAM is home to 25 stocks, including some of the more well-known bitcoin miners such as Riot Blockchain (NASDAQ:RIOT) and Marathon Digital Holdings (NASDAQ:MARA). In a recent note, clients Compass Point Research and Trading analyst Jason White highlighted the fact some bitcoin miners, including some DAM member firms, are realizing new efficiencies in the mining process.
“While we believe our hash rate growth estimate is relatively aggressive compared to consensus, we see it as a more conservative approach given that miner revenues and per-BTC costs are directly related to global hash rate share, potentially suggesting upside to our estimates if growth is lower than expected,” says the analyst.
Improved mining efficiencies are just one factor pointing to a compelling long-term growth trajectory for DAM mining components.
“As the digital assets ecosystem and adoption has grown, so have valuations of digital assets miners. As a group, crypto-miner valuations have grown primarily from two main sources – price appreciation of listed securities and new listings. Going forward, we anticipate that the size of the digital assets mining market should grow, as more companies come to market, and as digital assets adoption grows,” adds Lee.
However, there is more diversification in DAM than investors may readily realize. For example, other marquee holdings in the new ETF include Block (NYSE:SQ), Silvergate Capital (NYSE:SI), and Coinbase (NASDAQ:COIN) – none of which are bitcoin miners but each of which plays an integral in the broader digital asset ecosystem.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.