The cryptocurrency mining market is quite heated. Despite the recent losses recorded by the companies, their shares have registered strong valuations in the last 12 months, surpassing even Bitcoin.
The information was released by Leeor Shimron, vice president of digital assets at the Fundstrat analyst firm. He released his analysis during an interview with CNBC last weekend.
According to Shimron, the price of Bitcoin has appreciated by 900% in the last 12 months. On the other hand, the main mining companies in the sector saw gains of 5,000% in the same period.
In his analysis, Shimron took into account the four largest Bitcoin miners listed on exchanges. Together, they have a market value of more than R $ 5 billion:
- Marathon Digital Holdings;
- Riot Blockchain;
- Hive Blockchain;
- Hut 8.
Bitcoin and mining companies maintain a 1 to 3 ratio
For the executive, the results confirm the positive correlation between mining and the price of Bitcoin. However, the appreciation of the shares was even more expressive.
Riot Blockchain showed the best results. Its shares have skyrocketed 9,000% in the last 12 months – an appreciation 10 times higher than that obtained by Bitcoin.
Hut 8, on the other hand, had the smallest disparity, with an increase of “only” 1,200%, 300 percentage points less than Bitcoin.
Shimron concluded that for each 1% appreciation in Bitcoin, mining stocks appreciated by 2.5% on average. In other words, the gains represent a 3 to 1 ratio in favor of the mining companies.
However, the same correlation applies to bearish movements. Mining stocks tend to drop 2.5% for every 1% drop in Bitcoin at these times.
Lack of regulation increases volatility
Despite the strong gains, the stock market of Bitcoin mining companies suffers from strong volatility. And for Shimron, part of this is due to the lack of regulation.
In the researcher’s words, the absence of regulated funds and ETFs leaves investors little choice. Thus, they seek mining companies as a way to expose themselves to Bitcoin.
“Since the main source of revenue is Bitcoin, these companies are fundamentally bought in Bitcoin. So investors are essentially placing a bet on it when they invest in mining companies. Until a Bitcoin ETF is approved, investors can see listed mining companies as one of the only ways to gain exposure to Bitcoin, ”he explained.
He also cited the case of Coinbase, which is preparing to be listed on the stock exchange. In recent rounds, the company’s market value has surpassed Itaú, the largest Brazilian bank.
“(Coinbase shares) being traded to a valuation around US $ 100 billion in private markets. Clearly, there is an appetite for the investor to obtain exposure within the cryptocurrency space, and mining companies are just another segment within that ”, he concludes.
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