This past 24 hours have been incredible for investors in Bitcoin (BTC 7.49%). The world’s largest cryptocurrency surged from around $30,000 per token to break the $35,000 level in early morning trading Tuesday. As of 12:30 p.m. ET, Bitcoin’s price was hovering around the $34,000 level.
The crypto’s surge appears to be tied to bullish sentiment building around the listing of a spot Bitcoin exchange-traded fund (ETF). Blackrock’s spot Bitcoin ETF product has reportedly been listed on the Depository Trust & Clearing Corporation database, under the ticker “IBTC.” This has led many investors to believe that the Securities and Exchange Commission (SEC) has already capitulated in its fight against the formation of such ETFs. And that has crypto bulls expecting that a wave of institutional investment into Bitcoin will follow.
All of this has had ripple effects for Bitcoin miners, which are seeing strong price appreciation Tuesday. Shares of Canaan (CAN 13.45%), Marathon Digital (MARA 12.29%), Cleanspark (CLSK 12.93%), and Riot Platforms (RIOT 9.93%) had surged by 12.3%, 10.5%, 9.5%, and 9.4%, respectively, over the past 24 hours as of 12:30 p.m. ET.
Investors are looking for ways to play Bitcoin’s momentum
The launch of a spot Bitcoin ETF in and of itself isn’t really significant, in that Bitcoin miners and other publicly traded vehicles already exist as options for investors looking to play Bitcoin’s volatility either to the upside or the downside. Indeed, many who follow and invest in the crypto sector often look to Bitcoin mining stocks as a way to trade Bitcoin volatility. These equities generally have good liquidity and also provide higher beta than the token itself. (In other words, when Bitcoin moves in either direction, Bitcoin miners tend to make larger percentage moves.)
That said, the long-awaited debut of a spot Bitcoin ETF will be important, as it opens the door to what could be an absolute wave of institutional investment into crypto. A surge in open interest for the CME’s Bitcoin product surged above 100,000 Bitcoin Tuesday for the first time ever (a notional value of roughly $3.4 billion). That’s impressive, and signals just how much institutional capital has been waiting on the sidelines for the right vehicle through which to invest in crypto.
Will the launch of a spot Bitcoin ETF diminish investors’ interest in Bitcoin miners?
One question I’ve been pondering lately is whether a spot Bitcoin ETF could siphon off some investor demand for Bitcoin-adjacent stocks such as crypto miners, if investors (institutional or otherwise) view such an ETF as a more stable way to play the sector. I think this concept is directionally correct, though I do think Bitcoin mining stocks provide traders, speculators, and investors with another use case and purpose that’s worth noting.
Securing the Bitcoin network and validating transactions on the blockchain is what Bitcoin miners do. One could argue that without these companies, Bitcoin’s entire existence could be in jeopardy. Thus, with a Bitcoin halving event coming up next year, and other catalysts on the way that are expected to push Bitcoin’s price higher, there are fundamental reasons for investors to hold these stocks, independent of a Bitcoin ETF launch.
Overall, I think Bitcoin miners represent a unique option for investors looking to create a truly diversified portfolio. These higher-beta assets will tend to be much more volatile than crypto itself, though, and investors should be aware of this before jumping in. Tuesday’s price action indicates just what investors can expect, and on rally days like this one, that means big gains.
Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
