A pain point of US stock crypto assets: Why can’t Bitcoin mining stocks outperform BTC prices at this stage?
Before the BTC ETF was listed, there were only three types of crypto assets in the U.S. stock market, namely Coinbase exchange stock $coin, BTC investment company MicroStrategy $mstr, and then Bitcoin mining companies represented by $mara $clsk $riot.
At first, $coin was a direct reflection of the prosperity of the cryptocurrency market in the U.S. stock market. Even most of the time, $coin stocks moved before BTC prices. After the ETF was listed, the trend of $coin as a leading indicator of the cryptocurrency market weakened. Because Coinbase is an exchange, its value does not come from the BTC price, but is more affected by the risk preference of the entire cryptocurrency market, and is also closely related to its revenue and market share expectations. Since the ETF was launched, Bitcoin is Bitcoin, the cryptocurrency market is the cryptocurrency market, and the ETH price can better represent the prosperity of the cryptocurrency market, so we will find that the price trend of $coin is more similar to that of ETH.
MicroStrategy $mstr is the largest BTC dealer in this round of crypto cycle. It is a high-purity investment company with its stock price linked to asset yield. To put it simply, $mstr is essentially leveraged BTC. Above the BTC cost line, the company's net asset yield curve is very high, so it far outperforms the BTC price.
Before the halving of BTC production this year, Bitcoin mining companies followed the traditional idea of mining and selling. They earned cash for every BTC they mined, and the returns were positive. Buying mining companies also means buying the expectation that they can produce BTC spot in the future. After the halving, the financial reports of these American mining machine companies are all losses, because every BTC mined is a loss, and the more you mine, the more you lose. The losses here should be calculated according to marginal costs. Why is this so? Miners are different from investment companies such as MSTR. MSTR's costs are mainly loan interest, while miners' costs involve factory rent, electricity, equipment costs, server costs, employee wages, etc. For Bitcoin miners in the United States, these costs are very high now due to high inflation. The marginal cost of BTC output is even more than twice that of some Asian countries. If the BTC price is always above the miners' cost line, the longer the time is delayed, the lower the value of the stock will be, even if BTC is sideways.
In essence, the stocks of these mining companies are BTC call options. At the current BTC price, these options are still out-of-the-money. If you hold mining stocks, you will suffer from theta impairment every day. This is why the price of mining stocks cannot outperform the price of BTC. So when will the mining stocks see the dawn? People who often do options know that when the underlying price slides from out-of-the-money to in-the-money, the yield curve of options is the steepest. If you are optimistic about the continued rise in BTC prices and hold mining stocks, then all you have to do is wait for this yield range, and you will get amazing returns. If you can't wait, it's another matter. The miners may go bankrupt before you. Many people complain that these miners often issue additional stocks, so the stock price cannot go up. Why do they keep issuing additional stocks? The cash flow is not enough. These additional stocks are all used to maintain operations, and these will be converted into the marginal cost of BTC mining.
Therefore, when comparing these targets, they all have their own risks. The biggest fear for holders of $coin is that the bull market only belongs to BTC and not the cryptocurrency circle. The biggest fear for holders of $mstr is that the BTC price will be forced to liquidate in a short period of time in order to avoid liquidation. Holders of mining stocks are not only afraid of a drop in BTC prices, but also afraid that BTC prices will remain sideways.
If you are optimistic about the cryptocurrency market, the best strategy I can think of is to hold ETF $ibit + $coin + mining stocks, or $mstr $coin + mining stocks. However, in any case, the proportion of mining stocks should be the smallest. If you go all in on mining stocks, the risk is too high. If you are just a BTC maxi and are relatively conservative, then you can just hold $ibit. If you want to add a little leverage, you can hold $mstr in proportion.
