Bitcoin rises by 1%, mining stocks on average rise by 2.5%! Surprisingly, mining stocks have outperformed Bitcoin in performance over the past year.

According to the research results released by the global advisory firm Fundstrat, in the past year, the performance of cryptocurrency mining concept stocks has outperformed Bitcoin (BTC), and this trend has been accelerating since Bitcoin broke through $20,000. The company predicts that if Bitcoin remains in a bull market, this phenomenon may continue.

Bitcoin Rises 1%, Mining Stocks Increase by 2.5%

In a report by Fundstrat analyzing the stock prices of four major cryptocurrency mining companies (Marathon Digital Holdings, Riot Blockchain, Hive Blockchain, Hut 8), it was found that over the past year, the average return on investment for cryptocurrency mining stocks was 5,000%, while Bitcoin only increased by 900% during the same period.

Further analysis by researchers revealed that for every 1% increase in Bitcoin, mining stocks on average tend to rise by about 2.5%. Fundstrat stated that the performance of mining stocks is evidently highly correlated with the price of Bitcoin, and the trading conditions of Bitcoin can even amplify the upside and downside potential of mining stocks. Leeor Shimron, Vice President of Digital Asset Strategy at Fundstrat, stated in an interview with CNBC:

“For investors looking to invest in mining stocks, the beta coefficient makes it an excellent investment opportunity in the middle of a bull market. While there will be ongoing rallies and pullbacks, we still see significant growth potential at this stage.”

Researchers attributed the volatility of mining stocks to the lack of regulated cryptocurrency investment products in the U.S. market, speculating that until Bitcoin ETFs are approved, investors may view mining concept stocks as the only way to invest in Bitcoin in the public market. On the other hand, due to the impact of the pandemic on the mining supply chain, even as the price of Bitcoin continues to rise, newcomers find it difficult to purchase mining machines, to some extent guaranteeing the profitability and competitiveness of miners expanding their operations in the market during bear markets.

High Beta Coefficient is a Double-Edged Sword

However, despite the continued optimism for the price performance of cryptocurrency mining concept stocks, similar to the views of many traders on gold mining and oil exploration companies, Fundstrat tends to trade these mining stocks in bull markets but does not consider them as long-term investment targets. One of the reasons is their high beta coefficient:

“The high beta nature of mining concept stocks to Bitcoin means that in bearish market conditions, they may suffer greatly, with the downside volatility of mining stocks being greater than that of Bitcoin.”