Nearly reduced to rubble amid bitcoin’s 2022 bear market and, in some cases, forced to liquidate holdings of the cryptocurrency to meet liquidity demands, some bitcoin miners are rebounding to start 2023.
That’s good news for exchange traded funds such as the VanEck Digital Assets Mining ETF (DAM). DAM, which follows the MVIS Global Digital Assets Mining Index, is among the equity-based ETFs with intimate correlations to bitcoin. As such, the fund is benefiting from the digital currency’s resurgence this year.
The proof is in the pudding, as some of the ETF’s holdings, some of which flirted with penny stock status in 2022, are positing dramatic gains in the early innings of 2023.
“Year to date, companies like Riot Platforms, Marathon Digital and CleanSpark have all gained between 40% to 110%, according to market data from TradingView. These share price surges are in large part due to a sustained rally in bitcoin’s price. Since New Year’s Day, the leading cryptocurrency has gained over 44%. As a result, mining economics are also improving. Hash price has jumped 25% even as hash rate (which, when it increases, normally causes hash price to fall) set new all-time highs in January,” reported Zack Voell for Bitcoin Magazine.
Specific to the three miners mentioned above, their performances are material to DAM investors because each of those stocks is a top-five holding in the VanEck ETF. As of February 2, the trio combined for nearly a quarter of the fund’s roster, according to issuer data.
Despite the intense rally to start 2023, some DAM components and the bitcoin mining space at large still have plenty of work to do to reclaim lost glory. As of the end of January, the weighted average market capitalization of DAM’s 20 holdings was just $2.9 billion. However, at the industry’s peak, the combined market value of publicly traded bitcoin miners was around $100 billion.
“Also, it is worth noting that the macroeconomic headwinds facing every market effectively killed all technology markets around the world. Bitcoin mining had no chance of escaping the bloodshed. Meta, for example, was the worst performer in the Standard and Poor’s 500 index last year. Apple, which dominates the weighting of the same S&P 500 index at roughly 6%, also ended last year down sharply,” added Bitcoin Magazine.
That is to say, if tech stocks rebound this year, it could be an assist to bitcoin miners, including DAM member firms.
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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.