ETF Spotlight: WGMI Rides Bitcoin Rally

Bitcoin miners have received increasing attention as the bitcoin halving in April approaches.

The small but mighty $96 million Valkyrie Bitcoin Miners ETF (WGMI), which focuses largely on bitcoin mining companies, has been surging lately. 

WGMI, which launched in February 2022 and invests in companies that derive at least half their revenue from mining bitcoin or providing mining services, rose 13% last week to lead all ETFs. Its gains came despite bitcoin's price sagging nearly 20% from its all-time high over a five-day period that overlapped with WGMI's rise, according to CoinMarketCap, a provider of crypto markets data. (Bitcoin has subsequently recovered much of its lost ground.) 

WGMI's recent performance underscores investors' growing interest in the digital currency space. It also comes as bitcoin miners draw increasing attention—a byproduct of the approaching bitcoin halving, which will reduce the bitcoin rewards miners receive for confirming transactions on the bitcoin network from 6.25 to 3.125 bitcoins. The halving, which occurs every four years, is scheduled to take place in the latter part of April.

WGMI's largest holding is CleanSpark Inc. (CLSK), which accounts for almost 20% of its portfolio, according to data accumulated by etf.com. As of the close of Thursday trading, CleanSpark was up 95% this year. The ETF’s second-largest holding, Marathon Digital Holdings Inc. (MARA), composes 16.7% of the portfolio, according to etf.com data. It is down 1.5% year-to-date. 

WGMI's fifth-largest holding at 6.4% is Magnificent Seven darling Nvidia Corp. (NVDA). The producer of graphics processing units targeting the artificial intelligence space has gained 88% this year amid euphoria about AI's potential. 

Rattling the Crypto Miner Space?

Jim Crider, owner of the Austin, Texas-based financial planning firm Intentional Living FP, said the halving could rattle the crypto miner space.

“With the halving coming up, you have to be familiar with the miners’ balance sheets because their overhead will seemingly stay the same, however the mining reward will get cut in half,” he said. “You will need to look at what their cost to mine a block of crypto right now is, what is their U.S. dollar balance sheet, what their bitcoin balance sheet looks like, and can they make money other than mining?”

Crider noted that Riot Platforms Inc. (RIOT) is a diversified mining company because it makes money selling energy back to the Texas power grid during periods of peak energy use. 

“You just want to know what you own in these mining ETFs,” Crider said. “These miners are all jockeying to survive the halving and get a greater percentage of the total computational energy expended on mining.”