The Bitcoin Mining ETF That Returned 52% in One Week, And Most Income Investors Have Never Heard of It

It’s no secret in the cryptocurrency world that Bitcoin has plummeted from a high of roughly $122,000 to $59,000 of late. However, the digital infrastructure costs of Bitcoin mining are transferable to other technology sectors – such as A.I. 

At the time of this writing, CoinShares Valkyrie Bitcoin Miners ETF (NASDAQ: WGMI) is up +74.4% year-to-date and +243.77% year-over-year. It even recently returned +52% in a single week. WGMI exemplifies this unusual discrepancy between the trends of Bitcoin miners vs. Bitcoin itself.

The Miners’ Advantage

Bitcoin miners are making bank by utilizing their cryptocurrency infrasturcture for A.I. at top prices.

As a digitally created asset, Bitcoin and blockchain cannot exist without digital technology and the hardware required to generate it. The role of BTC miners is a crucial one. Without their server power, facilities, and equipment, the Bitcoin blockchain could not be maintained. As these hardware costs are fixed, when BTC prices rise, the miners’ revenues also rise — commensurately higher, after deducting those expenses. This is due to multiple Bitcoins that a miner may be responsible for, which exponentially increases revenues for that miner. 

For example, if the price of BTC goes up +10%, a miner whose resources are being deployed for 20 Bitcoins in the blockchain, will see those 20 Bitcoin revenues minus the base cost for overhead. If that cost amounts to a pro-rated 10% across 20 then profits might be something like this: 20 BTC/10% costs=2%; 10%-2%=8%; 20×8%=  160%.

Application Specific Integrated Circuits (ASIC) that only process cryptocurrencies have a high depreciation due to built in obsolescence in the wake of new designs. This depreciation accelerates when Bitcoin and other crypto prices fall precipitously. 

However, the same power sources, server power and computer equipment can be deployed for gaming, research, animation, or even more lucrative areas in demand, such as Artificial Intelligence. A number of entrepreneurial miners decided that being limited to one-trick pony Bitcoin miner status was overlooking the range of opportunities available with those same digital mining resources. As a result, companies in the Bitcoin mining sector who have branched out their equipment for other application use are seeing the additional revenue streams go directly to their bottom lines. Even as Bitcoin prices have faltered, these miners have managed to continue boasting strong revenue and profit streams, thanks to diversification of that same mining equipment. 

CoinShares Valkyrie Bitcoin Miners ETF

WGMI selects stocks based on havong at least 50% of revenues derived from BTC mining or mining support hardware or software.

Launched on February 7, 2022, WGMI is an actively managed ETF that invests in companies deriving at least half of their revenues from Bitcoin mining or providing hardware/software for mining purposes. Unsurprisingly, WGMI’s triple digit 1-year returns come mostly from those mining companies who read the handwriting on the wall early on and diversified their operations to include A.I. 

Top 1o Holdings:

• Cipher Digital: 15.43%
• IREN Limited: 13.48%
• TeraWulf, Inc.:  9.02%
• Core Scientific: 7.14%
• Keel Infrastructure: 6.98%
• Hut 8 Corp: 6.44%
• HIVE Digital Technologies: 5.79%
• Riot Platforms: 5.24%
• CleanSpark Inc.: 5.18%
• BitDeer Technologies Group: 4.73%

Bitcoin Mining vs. BTC

As Bitcoin prices have plummeted nearly -50%, WGMI’s Bitcoin mining stocks have sent the ETF up over +74% YTD.

Comparisons between WGMI and pure-play BTC ETFs, such as iShares Bitcoin Trust ETF (NASDAQ: IBIT) or Fidelity Wise Origin Bitcoin Fund (CBOE: FBTC) starkly illustrate the miners’ advantage via diversification and multiple BTC leverage:

Bitcoin mining companies’ continued bullish trend is certainly something worth considering for investors seeking growth. Although WGMI pays no dividend income, it can be helpful for income investors seeking upside to offset inflation and depleting NAV that may be occurring in their high-dividend holdings that might be returning capital.