Bitcoin is still the largest digital currency by market capitalization, but price are tumbling this year, dragging miners lower in the process.
However, some crypto market observers believe that recent moves by bitcoin miners, including shifting holdings of the digital currency to exchanges, are signs of capitulation, potentially indicating that a bottom is near or forming in digital assets.
If that call proves accurate, it could be constructive for exchange traded funds such as the VanEck Bitcoin Strategy ETF (XBTF). Miners could play a part in a near-term rebound for bitcoin.
“As miner revenue declines and profits get squeezed, miners have turned into sellers of bitcoin. The increasing volume of bitcoin sent from miners to exchanges shows selling pressure. Only this month, the flow of bitcoin from miners to exchanges has totaled 23K bitcoins, the highest monthly level since May 2021,” wrote Julio Moreno, senior bitcoin on-chain analyst at CryptoQuant.
Something that’s recently weighed on ETFs such as XBTF is, as noted above, the fact that miners are being forced to liquidate bitcoin holdings to raise cash, sending a steady flow of the digital currency to exchanges, leading to increased supply as prices decline. However, that ominous scenario could be near its end, perhaps indicating that a bottom could be near for XBTF.
“Consequently, the growth in miner-to-exchange flows (miners sending their bitcoin to exchanges for selling) spiked above normal levels when prices plunged, which we can classify as a capitulation event or the start of a capitulation period, which typically has preceded market bottoms,” added Moreno.
Should the miners signal that a credible bottom is in for bitcoin, XBTF could be levered to a rebound because it holds June and July bitcoin futures — the nearest month contracts. The VanEck ETF is actively managed.
As for miners, some experts are saying that the current “crypto winter” could be just the event needed to help investors identify quality names among bitcoin miners.
Risk-tolerant investors looking to bet on a bitcoin miners rebound can consider ETFs such as the VanEck Digital Assets Mining ETF (DAM) and the VanEck Digital Transformation ETF (DAPP). As its name implies, DAM is heavily exposed to bitcoin miners. On the other hand, DAPP is a more diverse play on crypto-correlated equities. Its 25 holdings include some bitcoin miners as well big-name crypto market players such as Coinbase (NASDAQ:COIN) and Block (NYSE:SQ).
For more news, information, and strategy, visit the Crypto Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
