Cryptocurrency mining stocks could continue to outperform bitcoin amid a ‘modern age gold rush’, Fundstrat says
- Cryptocurrency mining stocks have outperformed bitcoin and could continue beat the cryptocurrency’s gains, according to Fundstrat.
- Shares of Riot Blockchain have jumped 8,000% over the last year, compared to bitcoin’s 525% gain.
- But investing in mining companies may magnify gains and losses compared to buying bitcoin, the firm says.
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Shares of the largest public mining companies have outperformed bitcoin in the last 12 months and could continue to do so as bitcoin and the wider cryptocurrency market represents the “modern-age digital gold rush,” according to research from Fundstrat’s Leeor Shimron.
In a recent note, the Vice President of Digital Asset Strategy said the purest way to gain exposure to bitcoin mining is to invest directly in mining farms, like public companies Riot Blockchain, Hive Blockchain, Marathon Digital Holdings, and Hut 8.
“Over the past year, they greatly outperformed Bitcoin, which accelerated when the $20,000 all-time high was breached. We expect this dynamic to continue as the bull market plays out,” Shimron said.
Riot Blockchain, for example, has gained roughly 8000% over the last twelve months, while bitcoin has rallied about 525% during the same time period.
Shimron also highlighted that the mining companies have taken the necessary steps to capture the growth of the current bitcoin bull run, like investing in efficient hardware and upgrading machines to increase operating leverage and hashrate capacity.
However, investors should be aware that buying shares of mining companies may be risky, with massive upside potential but also potential for magnified losses during bitcoin’s bear markets.
“Although there is not enough historical data to confirm, mining company equities may serve as a high-beta play on Bitcoin,” said Shimron. “This would magnify performance to the upside and downside for these types of stocks. Clearly their performance is tied to the price of Bitcoin, but they may deliver amplified returns during a bull market. We are seeing this play out in the current market cycle. When Bitcoin enters a bear cycle, we would expect mining equities to have greater downside volatility than Bitcoin.”