Mining Stocks Being Replaced? Research Institution: Investors are Going Long on Bitcoin ETFs and Shorting Mining 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.

Review of the Last Halving: More Than Half of Mining Companies Outperformed Bitcoin

The stock prices of mining companies surged far more than Bitcoin during the last bull market.

Looking back at the performance after the 2020 Bitcoin halving, the gains of mining companies were quite significant, with Marathon Digital Holdings MARA showing astonishing growth, seemingly unaffected by the potential impact of the halving on mining company profits.

Mining Company Stocks Have Failed to Keep Pace with Bitcoin

Mining company stocks have traditionally been seen as an indirect way to invest in Bitcoin. The larger volume of traditional investors may have led to their outperformance compared to Bitcoin, but this situation seems to have changed with the introduction of Bitcoin ETFs.

As of December last year, Marathon was up by 628% and Bitfarms by 577% for the year, surpassing Bitcoin in gains.

However, following the approval of Bitcoin ETFs, as Bitcoin surged to new all-time highs, mining company stock prices remained far below their previous highs. The Valkyrie Bitcoin Miners ETF WGMI, which tracks the performance of listed mining companies, also dropped by about 21%.

Investors Going Long on Bitcoin ETFs, Shorting Mining Company Stocks?

Research firm Galaxy pointed out that, similar to the previous positioning of mining company stocks, almost any U.S. brokerage client can access Bitcoin ETFs without needing to go through a crypto exchange.

Galaxy mentioned in their report:

Retail investors may still buy mining stocks, but for institutional investors, shorting mining stocks has become the preferred trade. In the short term, institutions seem more likely to go long on Bitcoin ETFs and short mining stocks, a trend we have been observing since early 2024.

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

The disconnect between Bitcoin and mining company stocks seems to imply a different nature of this bull market.

A recent mining report by asset management firm CoinShares also indicated that with the uncertainty brought by the Bitcoin halving, competition among mining companies will intensify, with only around 5 companies potentially able to profit and sustain operations.

CoinShares Report: Post-Bitcoin Halving, Mining Costs at $37,800, Only 5 Mining Companies Profitable