Bitcoin’s Bullish Start to 2023
The new year has brought a wave of optimism for Bitcoin (BTC) and various altcoins, with many cryptocurrencies soaring to impressive multi-month highs. It’s a perfect time to check how these digital coins are navigating the ever-evolving financial landscape.
The ETF Scene: A Bitcoin Affair
Leading the charge in the equity exchange-traded fund (ETF) market is Valkyrie’s Bitcoin Miners ETF (WGMI), which has seen a jaw-dropping 40% climb year to date. Unlike that fluctuating friend who keeps changing their mind every hour, this ETF appears to be on a clear path to profitability.
Concentration is Key
It’s worth noting that Eric Balchunas, a senior ETF analyst at Bloomberg, highlighted the concentration of the WGMI. The ETF primarily invests in a mere 20 firms, including recognizable names like Argo Blockchain, Bitfarm, and Intel. While a small group looks cozy on paper, it raises some eyebrows about the diversification of risk.
How Does WGMI Work?
Launched in February 2022, the WGMI ETF doesn’t invest directly in Bitcoin. Instead, it cleverly offers exposure through securities of companies that derive at least 50% of their profits from good ol’ BTC mining. Think of it as a relay race: the ETF hands off the baton to companies whose lifeblood is Bitcoin mining, with the remaining 20% nestled safely in firms with significant Bitcoin holdings.
A Rocky Road for Crypto ETFs
The journey to mainstream ETF acceptance has been a rollercoaster. The first Bitcoin ETF approved in the U.S., ProShares Bitcoin Strategy ETF, captivated the market in October 2021, raking in $1 billion on its opening day. However, the optimism was short-lived, as bearish market conditions loomed over the crypto landscape in 2022. Talk about a rude awakening!
2022: A Year of Disappointment
Despite the promise of crypto ETFs driving mainstream adoption, they took a nosedive, earning the dubious honor of being the worst-performing ETFs in Australia and the United States. In fact, according to ETF.com, the top four worst-performing ETFs in the U.S. last year were crypto-related.
What’s Next for Bitcoin ETFs?
As the crypto industry continues to evolve, the question looms large: will Bitcoin ETFs make a triumphant comeback? With 2023 already displaying increased interest, one can only hope that regulators find a way to approve spot market-based ETFs in the near future. Who doesn’t love a good come-from-behind story?
