Amid Bitcoin (BTC) mining stocks such as Hut 8 Mining hitting multi-month lows, a top industry executive has outlined key differences between investing in BTC and investing in BTC-linked stocks.
Ben Gagnon, Director of Mining at Bitfarms, the leading Bitcoin mining company, believes that direct investment in BTC and exposure to BTC mining stocks are two “fundamentally different” investment strategies that suit different people and interests.
“A direct investment in Bitcoin is a simple long-term investment suitable for the vast majority of people,” Gagnon said in an interview with Cointelegraph.
On the other hand, investing in publicly traded BTC miners is a “much more sophisticated strategy,” the executive noted. “For sophisticated investors looking for liquid exposure to Bitcoin in their traditional stock portfolio, publicly traded miners are one of the best ways to do it”Gagnon said.
The CMO went on to say that the primary value of Bitcoin miners is derived from the value of BTC they mine and generate as cash flow over time, adding:
“When Bitcoin goes up, miners should go higher. When Bitcoin goes down, miners should go down further.”
Gagnon’s comments come amid some big BTC mining stocks posting a significantly larger drop compared to major cryptocurrencies like Bitcoin and Ether (ETH).
Riot Blockchain, one of the largest Bitcoin mining companies in the world, has seen its shares fall 45% year-to-date, trading slightly above $12 during premarket trading, at the time of writing, according to TradingView data.. Another public cryptocurrency miner, Hut 8 Mining, is down more than 50% so far this year. Bitfarms shares plunged around 41% in the same period.
Meanwhile, Bitcoin and Ether prices have decreased by 15% and 20%, respectively, since January 1, 2022, according to data from CoinGecko.
The same correlation of Bitcoin price over BTC mining stocks worked in another direction last year, when BTC was on track to hit all-time highs above $68,000. Amid a massive cryptocurrency rally in 2021, Bitcoin mining stocks were massively outperforming the overall cryptocurrency market. As Cointelegraph previously reported, BTC mining stocks outperformed BTC by as much as 455% over a one-year period in March of last year.
The value of Bitcoin is not the only trigger affecting the value of Bitcoin mining stocks, according to Bitfarms mining executive. Gagnon pointed to five main aspects to evaluate “any public miner”, including the amount of BTC owned, current mining volumes, the cost of mining, expansion investments, and future mining plans.
“Although each public Bitcoin miner has their own strategy and differentiators as a business, they are all very similar,” Gagnon noted.
According to data from blockchain and cryptocurrency analytics startup Arcane Research, Bitfarms is one of the largest public Bitcoin miners in the world, producing 363 BTC ($14.7 million) as of March 2022. In addition to being a major BTC miner, Bitfarms also made its first Bitcoin purchase in January, purchasing $1,000 BTC ($40.4 million).
Among other top BTC producers in March, Core Scientific reportedly generated the most BTC, producing 1,143 BTC ($46.2 million). Riot Blockchain and Marathon Digital mined 511 BTC ($20.6 million) and 436 BTC ($17.6 million), respectively.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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