Marathon Digital (NASDAQ: MARA) is up 17%, Riot Platforms (NASDAQ: RIOT) some 10% on the back of the rise in the Bitcoin price. Which makes sense as both are leveraged to that BTC price. Yes, we're aware that they're more than merely crypto miners, both of them, but it's still true that they are leveraged to the Bitcoin price. Their energy costs, their overheads - so, both fixed and variable costs - do not change as the price of their output, BTC, changes. So, a rise in the Bitcoin price feeds through directly to their gross and thus net profit. Or, as the case may be, reduces their losses. So, if Bitcoin goes up in price then the value of these two stocks - so also with other miners - should go up by more than the change in BTC. It's worth noting that they should also fall by more than any fall in BTC. Because that's the way leverage does work, both up and down.
The background here is that Blackrock has flied to run a spot BTC ETF. Given that it's Blackrock making the filing we'd expect to gain a definitive answer out of the SEC as to whether this is going to be possible. Unlike smaller - or crypto only - applications the SEC can't just stall this, politically at least they're going to have to give an answer. The assump[tion being made is that if - for there is still risk here - the application is granted then this is a validation of the Bitcoin market overall, indeed of crypto, and so the price should rise. If BTC rises then see above about leverage for what it should do to stock prices like RIOT and MARA.
There is also that point that if there's a new ETF on the block then there will be a new buyer for BTC in order to fill up that ETF - so, again, the Bitcoin price should rise upon approval, if approval is what happens.
Marathon Digital stock price from NASDAQ
It is also, however, possible to take the next derivative of this logic and think like Robert Shiller - he does have the Nobel for his work on speculation and prices so we should pay attention. Markets are only complete, this prices right, when all can express their ideas of what prices should be. That means that short selling is a vital part of gaining proper and correct market prices.
Yes, we know, it is possible to go short Bitcoin. But it's not easy and it's not something the general retail investor is going to struggle through. However, an ETF on the spot BTC price provides a very simple and easy way to short Bitcoin. So, it's not wholly and entirely obvious that even if Blackrock's BTC ETF application is successful that the impact upon the Bitcoin price will be positive. It is possible- and we do emphasise the word “possible” here - that the impact will be negative. The as yet unmet desire to easily short Bitcoin might become the dominant price impact.
Shiller was right in the theoretical sense, we're going to have to wait and see which way Bitcoin, and thus miners like Marathon and Riot, go in practice..