Here’s why Bitcoin mining stocks have been outperforming BTC price in 2021

Bitcoin (BTC), while it may have outperformed traditional financial market investment returns, still fell short of Bitcoin-related businesses.

BTCs price climbed 290% from a year ago. It jumped from $10,695 up to just over $42,000. Marathon Digital Holdings, one of the most prominent crypto mining companies in North America, saw its shares rise by 1,641% during the same period.

Weekly price chart for MARA stock Source:

Pumps that are controlled by institutions

Spot BTC prices are outperforming crypto mining firms in terms of YoY returns. Bitfarms from Canada (BITF), for instance, soared 1,736% while Hut 8 Mining and Riot Blockchain (RIOT), jumped 1,010%, and 913% respectively over the course of a year.

Spot Bitcoins performance compared to crypto-focused stocks over a one year. Source: Ecoinometrics

Ecoinometrics founder Nick, a crypto-focused newsletter, described mining stocks as an “obvious choice,” noting that they provided institutional investors indirect exposure in Bitcoin markets.

In an article published Sept. 27, the analyst stated that “I believe a lot of institutional Investors havent yet touched trading spot BTC, mainly for compliance reasons,” and added:

It is somewhat like gold miners back in the day when it was difficult to obtain physical gold. These guys have probably learned to trade stocks and not spot.

These statements were made after Morgan Stanley disclosed in its securities filings, that it had more then doubled its exposure to Grayscale Bitcoin Trust (GBTC), a traditional digital asset investor vehicle.

Detail: As of July 31, Morgan Stanley Europe Opportunity Fund held 58,116 shares in the Grayscale Bitcoin Trust (or GBTC).

Cathie Woods Ark Invest purchased over 450,000 GBTC tokens in July. This purchase was worth approximately $1.4 million. These investments were in line with the mining stock performance and showed an increase of institutional appetite for traditional, crypto-focused investment products.

Nick said that crypto mining stocks would continue to be a good investment as long as there is no viable alternative such as an American exchange-traded fund.

Hodling and scaling

As a result, demand for mining stocks rises as most firms place greater emphasis on scaling and holding.

Marathon, for example, reported in its August non-audited report that it received 21,584 top-tier Bitcoin mining ASICs from Bitmain in 2021. It also stated that 5,916 additional machines are currently in transit. The company anticipates operating at least 133,000 Bitcoin mining devices by the middle next year.

Marathon also noted that it currently holds 6,695 BTC. This includes the 4,812.66 BTC purchased in January 2021. Marathons bitcoin holdings now have a fair market value of $333.4 million. This gives the company sufficient capital to increase its production in the future.

Riot Blockchains August report revealed a 451% increase of its Bitcoin mining capacity over the previous year. This was helped by Riot Blockchain’s fleet of 22,050 miners with a hashrate capacity of 2.2 exahash each second (EH/s). In August 2021, the firm had mined 441 BTC.

Related: Since Feb. 2016, miners have amassed $600M in Bitcoin.

Riot stated that they plan to have 25,650 Bitmain machines up and running by September. Riot is currently building a new Texas mining facility.

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