Is it better to own bitcoin stocks than BTC itself?
In a bull market, yes. In a bear market, no. Bitcoin stocks are more volatile than bitcoin itself, so be prepared for a wild ride.
Bitcoin (BTC) is up about 150% for the year, lofted by high interest rates around the world and some hopeful news of the imminent arrival of spot BTC exchange-traded funds (ETFs) that many expect will propel the crypto market leader to new all-time highs.
The arrival of ETFs is expected to open the floodgates to institutional money, which is currently sidelined by investor mandates prohibiting a direct investment in BTC. There are several futures ETFs for bitcoin, but US regulators have been reluctant to approve spot ETFs, fearing the potential for market manipulation and fraud, not to mention the custody issues surrounding digital assets.
The US Securities and Exchange Commission (SEC) recently lost a court case against digital asset manager Grayscale, which has been lobbying to launch its own spot ETF. This court decision, and the fact that the SEC did not appeal it, strengthens the arm of the fund managers awaiting ETF approvals, such as BlackRock, Valkyrie, WisdomTree and ARK Invest. These companies between them manage trillions of dollars in assets, so even a small percentage of these funds entering the crypto space should have an outsized influence on prices.
There’s another factor behind the 2023 rally in BTC: the upcoming ‘halving’ in 2024 when the rate of BTC supply will be reduced by half from the current 6.35 every 10 minutes. There is a halving in supply every four years, making the coins scarcer to come by and, therefore, more likely to cost more. These ‘halvings’ are generally preceded by a market rally, and so it is this time around.
Just as gold bugs prefer owning gold mines rather than physical gold (because mines are more highly geared to gold price shifts), so some prefer owning bitcoin mining shares rather than BTC itself.
The table below looks at some of the main bitcoin miners and their performance so far this year. It’s clear you would have done exceptionally well holding stocks such as Bitfarms, Marathon Mining, and Riot Platforms, which delivered 350-450% gains over the year to date.
Bear in mind that these results are flattered by the 150% rise in the price of BTC this year. In bear markets, the losses are equally amplified.
Whether bitcoin stocks or BTC perform better is largely dependent on the trend direction and timeframe analysed, according to data compiled by Trading.biz analyst Cory Mitchell.
Looking at two bitcoin stocks, Marathon Digital (MARA) and Riot Platforms (RIOT), both listed on Nasdaq, Mitchell notes that both tend to overshoot BTC in bull and bear markets. During the 75% decline in BTC’s price between November 2021 and December 2022, MARA dropped 95% and RIOT fell 91%.
In the bull market between October 2020 and April 2021, BTC rallied 428%, against 1 413% for MARA and 1 160% for RIOT.
“Over and over again, there is a pattern that shows when bitcoin rises, MARA and RIOT tend to overshoot,” says Mitchell. “They perform better but then drop harder when bitcoin drops. While bitcoin is a volatile asset, MARA and RIOT are even more volatile, sometimes moving as much as five times that of bitcoin. For example, during the 2020/2021 rally, the stocks moved more than three times the amount of bitcoin.”
How bitcoin stocks performed against BTC in 2023
| Stock (Nasdaq Code) | Activity | % gain year to date |
| Bit Digital (BTBT) | Bitcoin mining, treasury management, digital asset staking, AI | 338% |
| Hut 8 Mining | Digital asset mining, outsourced mining service, data centres, maintenance | 128% |
| Bitfarms (BITF) | Canadian-based Crypto coin and token mining with operations in several countries | 450% |
| Marathon Digital (MARA) | Bitcoin mining, with a large store of BTC reserves | 438% |
| Riot Platforms (RIOT) | Bitcoin mining and data centre hosting | 359% |
| HIVE Digital Technologies (HIVE) | Mining bitcoin, Ethereum Classic, among others | 135% |
| Microstrategy (MSTR) | Holds the largest reserves of BTC of any company. It offers business intelligence, mobile software and cloud-based services. The stock price is correlated to BTC. | 293% |
| Bitcoin | 150% |
Crypto-related stocks are most heavily concentrated on the Nasdaq exchange, and the above table is just a sample of the more interesting ones. Some are pure bitcoin miners, others mine a range of coins, and more than a few (such as Bit Digital) have diversified into treasury services, outsourced mining, and data centre hosting (such as RIOT). MicroStrategy holds the largest reserves of BTC of any company in the world and is seen as a proxy for BTC.
