Cryptocurrencies rallied mightily last month, and while many still have a long way to go to reclaim lost luster, July strength could be a sign of things to come.
Add to that, some of crypto’s biggest names, including bitcoin and ether, contributed to the July upside. Should the titans of the digital assets universe continue rebounding, that could provide support for exchange traded funds such as the VanEck Digital Assets Mining ETF (DAM).
As its name implies, DAM’s lineup is comprised of cryptocurrency miners, including those that mine bitcoin — meaning that the ETF, though it’s equity-based, is correlated to crypto price action. That much is on display in recent weeks, as DAM is higher by 25.48% over the past month, or about quadruple the S&P 500’s gain over the same period.
Potentially adding to the allure of DAM is that recent carnage in the crypto space are separating the wheat from the chaff, helping investors identify contenders and pretenders in the industry.
“Multiple bankruptcies across the crypto lending ecosystem, including Voyager, Vauld, Zipmex, Three Arrows Capital and Celsius, punched an estimated $5B hole in corporate crypto balance sheets. However, the pain prompted consolidation, led by buyers FTX and Nexo, giving investors some confidence that a buyable bottom has formed,” noted Matthew Sigel, VanEck head of digital assets research.
Obviously, DAM’s 24-stock lineup is heavily by populated by growth stocks, which lagged through the first half of 2022. However, growth equities are rebounding. If renewed risk appetite proves durable, it could provide support for more upside by DAM and its member firms.
“Meanwhile alongside falling commodity prices and improving risk appetite generally, we observed significant crypto collateral posted on-chain to leveraged BTC and ETH positions in DeFi, bringing the levels at which material liquidations might occur down substantially,” added Siegel.
Another point in favor of DAM, though longer-ranging, is that many bitcoin miners, including those residing in the VanEck ETF, are increasingly embracing renewable energy. That’s a twofold benefit to these companies. First, it lowers energy costs and could increase profits. Second, bitcoin miners’ embrace of clean energy could enhance their environmental, social, and governance (ESG) and sustainability resumes, potentially opening the asset class to a broader swath of growth-minded investors.
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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.