A market cap weighed index consisting of all the bitcoin miners with a market cap of over $500 million has a 90-day correlation with bitcoin of 0.68. Especially the North American bitcoin miners (Marathon, Riot, Hive, Hut 8, Bitfarms and Bit Digital) are highly correlated, where Bitfarms has the highest correlation of 0.89.

A market cap weighed index consisting of all the bitcoin miners with a market cap of over $500 million has a 90-day correlation with bitcoin of 0.68. Especially the North American bitcoin miners (Marathon, Riot, Hive, Hut 8, Bitfarms and Bit Digital) are highly correlated, where Bitfarms has the highest correlation of 0.89.

Historically, publicly traded miners have tended to outperform bitcoin in positive return periods and fall behind in negative return periods. Therefore, miners seem to function as high beta bitcoin.

At the core, the point of mining is to produce bitcoin for a lower cost than if it simply was purchased in the market. As explained in the following bullet points, this is what makes bitcoin miners high beta bitcoin.

In bitcoin bull markets, the block reward increases in value, while the hashrate lags the bitcoin price increase. Therefore, miners with existing plugged-in capacity enjoy periods of super profits. In these super profit periods, they can produce bitcoin for a much lower cost than the market price.

Similarly, in bitcoin bear markets, mining stocks tend to fall behind bitcoin. The reason is that the present value of all the bitcoin the miners’ machines (ASICs) can produce in the future decreases substantially. An ASIC can be viewed as a bond since it gives the owner future cash flows in the form of bitcoin. Receiving bitcoins in the future is naturally riskier than buying the same number of bitcoins in the present, thus giving miners a risk premium.