If Bitcoin is replacing gold, then Bitcoin miners are replacing gold miners.

  • Bitcoin is up 407% YoY, and the miners are up 1281%.
  • Gold is down 6% YoY, and the miners are down 13%.

Whether it’s Bitcoin or gold, mining stocks are a leveraged play on the underlying asset. Typically, in a bull market, when the underlying asset price goes up, the miners go up even more. And in a bear market, when the asset price drops, the miners go down even more. Since the 2020 halving, Bitcoin has been in a bull market, and as a result mining stocks have fabulously outperformed.

On the contrary, gold is caught between a mid-cycle correction or the first stages of a bear market (shhh, don’t tell the gold bugs). Consequently, gold miners have been clobbered. Just look at the chart below; Bitcoin miners are eating gold miners’ lunch…and dinner.

Performance of top five Bitcoin and gold miners by market capitalization (indexed to 100 with equal weighting)

The table below breaks down the individual index components and compares the returns to either Bitcoin or gold.

The effects of leverage are clear, even for gold mining stocks, which gained 8% as the gold price increased 2% over the current quarter. Recently, however, Bitcoin miners have underperformed Bitcoin, gaining only 34% as Bitcoin increased by 38% QTD. This may indicate that the recent rally is a “silent” one and Bitcoin miners have yet to experience another leg up.

Seeing large percentage gains in the Bitcoin miners may look unattractive, but here is a chart showing the monumental price appreciation of gold miners during the 1970s to 1980s gold bull market. As previously mentioned, the market may yet see another jaw-dropping leg up in Bitcoin miners. (On a personal note, I believe we are somewhere near the red arrow marked on the chart.)

It’s worth noting that there is astronomically more fiat floating around today than before, which could juice returns to miraculous heights.