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Simon Erickson, 7Investing: “We’ve talked about a lot of companies that benefit from cryptocurrencies… we chatted about Square (now “Block”) as a beneficiary of this, we’ve chatted about CME Group, as an exchange that allowed the futures trading of Bitcoin several years ago, and we’ve talked about Coinbase before, as kind of one of the exchanges where you can buy and sell cryptocurrencies and do a whole lot more things. Anything else is on your radar, or as an equity investor, that you’d be interested in?”
As the traditional stock market continues to hit new all-time highs, the sentiment surrounding the macro-economy faltered in the second half of 2021. Statements from the Federal Reserve around reigning in QE and hiking interest rates in 2022 have put the brakes on some sectors of the economy, including tech and stocks. This environment is also not strong for cryptocurrencies or crypto-stocks.
However, one exception is Customers Bancorp (CUBI), a traditional bank (if you can believe it!). In 2021, CUBI expanded beyond simply a conventional bank and reinvented itself as a crypto-friendly bank by enabling crypto-related services to customers. CUBI is not the only bank to make such a move but remains one of the top performers in this sector despite the larger macro environment acting as a headwind.
However, looking at 2021 overall, traditional Bitcoin mining companies have generally outperformed the underlying asset on the year. The chart below shows some examples, but not pictured are companies like HIVE, RIOT, Hut8, and more. Considering the second chart, mining revenue for 2021, it’s not hard to see why mining companies have had such a great year. Bitcoin mining revenue had record moments in 2021 thanks to the mid-year China ban, which removed ~40-50% of the hashrate for a few months. This ban allowed the remaining companies—many of them U.S.-based—to reap the rewards due to the sudden lack of competition.
Finally, below is a table from Blockware that calculates the year-to-date (YTD) beta of several crypto and crypto-exposed stocks in 2021, compared to BTC. This value demonstrates how correlated a particular stock is to Bitcoin’s performance. Here you can see that companies who are direct players in the crypto industry have stock prices that are very correlated to the price action of BTC over the long term. 6 out of the 7 crypto-related names included have a positive BTC beta, averaging 1.52. On the other hand, companies that aren’t as directly involved, don’t appear to have as much correlation.
