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This crypto ETF delivered over 100% gains in 2023; Should you buy it?

Valkyrie Bitcoin Miners ETF returns over 100% in 2023 as crypto market rallies

After a turbulent year-long bearish sentiment, the impressive crypto market rally in 2023 has impacted related products such as exchange-traded funds (ETF). 

In this line, little-known Valkyrie Bitcoin Miners ETF (WGMI) is the best-performing fund in 2023, with gains of over 100% in January, data by Bloomberg indicates. 

The ETF’s rally is a relief for investors since WGMI lost about 80% in 2022, impacted by the overall market downturn that saw Bitcoin (BTC) lose its value by about 70%. Interestingly, BTC is up almost 40% in 2023.

Valkyrie Bitcoin Miners ETF returns. Source: Bloomberg

Based on the new year’s performance, WGMI, which stands for ‘We’re Gonna Make It,’ appears to have broken away from the market, considering there is a gap of about 25% points from the next U.S. fund. 

At the moment, Valkyrie Bitcoin Miners ETF represents mining firms such as Digihost Technology, Bitfarms Ltd, Marathon Digital Holdings Inc., Hive Blockchain Technologies, and Riot Platforms.

In the meantime, WGMI expresses bullish potential with an overall positive technical analysis. A summary of the daily gauges on TradingView recommends ‘buy’ at 12 while moving averages are for a ‘strong buy’ at 11.

WGMI technical analysis. Source: TradingView

Notably, the ability of the WGMI to maintain gains and stand out as an ideal investment product will depend on the general Bitcoin price trajectory. Based on historical performance, the ETF could crash if the current Bitcoin bull run is invalidated.

ETF capitalizing on Bitcoin rally

Mohit Bajaj, director of ETFs at WallachBeth Capital, attempted to put into perspective the performance of funds in the wake of the Bitcoin rally. According to Bajaj: 

“Bitcoin is up 40% year to date, so that is boosting the demand for the underlying stocks. Plus, many of those stocks are thinly-traded, “so when there is excess buying, it will cause some higher price deviations.”

Notably, the wave of ETF gains is also reflected in other products such as VanEck Digital Assets Mining ETF (DAM), the VanEck Digital Transformation ETF (DAPP), the Global X Blockchain ETF (BKCH), and the Bitwise Crypto Industry Innovators ETF (BITQ) which have rallied by over 60%.

Miners back in business

It is worth noting after facing uncertainty, mining companies are roaring back to business after the lows of 2022 that saw different entities adapt survival mechanisms. For instance, as reported by Finbold, in 2022, miners caved to the effects of the crypto winter and moved away from the historical strategy of ‘HODLing’ their haul to selling as a means of sustaining operations. 

Analysts suggest that besides the influence of Bitcoin rally, investors are guided by a possible fear of missing out (FOMO) that has recently hit the market. 

The FOMO sentiment is complimented by a previous Finbold report showing that the crypto ‘Fear & Greed’ Index had hit 61, the highest level since 2021. With the market sentiment moving towards the greed zone, investors seem to be projecting a possible Bitcoin sustained rally in the coming days. 

Lastly, the market has ignored the lingering uncertainty with the continued filing of bankruptcies and fallout from the FTX crypto exchange collapse.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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