When Will Bitcoin Miners Pump?

Salaamu alaikum, everyone. I hope you are doing well. Today is July 17th, Wednesday and Bitcoin is 64,300. Tesla's at 249. Today I'm going to talk about the Bitcoin miners. And we're going to try and make sense of some of its movement. See why it isn't really following coins priced that closely. So without further ado, let's get started. Really do appreciate the likes. So keep them coming. We've been hitting 100 likes every video consistently. I really appreciate that. As always, it's not financial advice. So be sure to do your own due diligence before making any investing decisions. So let's just take stock of where we are with the Bitcoin miner trade and whether or not our thesis for it in the beginning has panned out because the argument for Bitcoin miners is that they may outperform Bitcoin during Borons has this panned out or not. So the average miner right now, if you look actually average miners, not the right term, the average minor return, if you look at that and you compare it to Bitcoin, then the average minor return has really outpaced Bitcoin's return. Regardless of timeline, so long as you're looking at 12 months, six months, three months, two months or one month. So anything less than 12 months and the average return for Bitcoin miners has been superior to Bitcoin's return. So if you look at the average minor return over the last 12 months. Now, this has been updated on July 10. So it does differ a bit where today we're July 17. So it's a week outdated, but if you look at the, and by the way, this is from a coin no metrics, which actually have some really good, really good articles on Bitcoin highly, highly recommend. But if you look at the 12 months return, it is 204% versus Bitcoin or percent, something like I was energy did 454% in the last 12 months versus bitcoins 94%. If you look at, for example, on a two months scale, 71% average return for Bitcoin miners versus minus 10%. Again, this was as of July 10. So really the Bitcoin miners have sort of had a life of their own that is somewhat separate to the price of Bitcoin. So oftentimes you'll find, you know, when Bitcoin's price is going down, a lot of Bitcoin miners are doing really well. And conversely, when Bitcoin is recovering and the price of Bitcoin is doing much better, as we saw in the last week, a lot of miners are struggling. So what is going on here? The thesis for Bitcoin miners is that over time, the rewards for mining Bitcoin are actually going down. So every halving day are cut in half. However, the revenue that these miners are generating should actually increase with time. And we've actually seen this. So whether it's after the second halving, third halving, fourth halving, there are spikes and minor revenue, despite that happen after the after the halving. And this is despite the drop in minor rewards. And so, and each time we're getting to higher highs in terms of Bitcoin, minor revenue. So over time, as these companies generate more revenue, the idea is that they should become more valuable. However, if we look at the actual returns for these minor stocks and we compare them month to month with the change in the revenue that the miners actually generate. Now, we see that there is a correlation, but it's not a tight correlation. So a tight correlation would have all these dots much closer to the diagonal line across this graph. So this graph shows average return of minor stocks on the x axis and the change in revenue from the previous months on the y axis. If there was perfect correlation, then these orange dots would be closer to the diagonal line. But really, we see them very much dispersed. There is a there is a soft correlation, but it's not really that tight. So what we can understand from this is that fund flows from investors are not necessarily, and this is ultimately what's going to determine the price of a stock is, you know, how much and how many investors are trying to buy it at any given time. This is not necessarily tightly correlated with the price of Bitcoin. The argument for Bitcoin miners is that they may outperform Bitcoin because as the price of Bitcoin goes up, the operating profit for these Bitcoin miners should go up by a larger percentage. And demand for this recognition for this may actually come after a jump in the price of Bitcoin may come after a drop in the price of Bitcoin because anticipation for a pump may build after a drop. So it's really about the future price movements, the anticipated future price movements of Bitcoin as opposed to where Bitcoin has already been. And so this is one sort of piece to the puzzle as when it comes to understanding the price movement of Bitcoin miners. Now, the other piece of the puzzle is something that's becoming more and more clear and it's unique to this particular coin cycle, which is the data center play. So just today, we heard that cipher mining was considering a sale of its operations. And this explains why cipher has been up close to 50% over the last week. Obviously, you see a lot of questions. Why is cipher mining doing as well as it is? And it turns out that, well, there was something going on behind the scenes. There was talk about a potential sale and cipher mining is actually considering this sale. And so we saw this play out previously with core scientific and perhaps we're going to see this a lot more in the near future. That can be used in the way of high performance computing and data center fulfillment. So the more in tune a Bitcoin miner is to the data center opportunity, the high performance computing opportunity. It is likely that the better it will do, the more interest from investors it is going to get. And even northern data. So this is not an isolated case with regards to the interest in data centers from Bitcoin miners. So Bitcoin miner northern data, which is actually the largest Bitcoin miner in Europe, recently announced that there would be raising $233 million in additional capital in order to invest in NVIDIA GPUs and data center infrastructure. So this is going to be a common theme. And to the extent, as I mentioned, Bitcoin miners recognize this and invest in it, I think you're going to see funds flowing in their direction. So when it comes to Bitcoin miners and picking the ones that you think are going to be winners, this is a big part, I think, of the decision making process. And investor interest is what's going to drive price, even more than necessarily Bitcoin's price on just an objective basis. So you want to be focusing on because we all know Bitcoin, I mean, I think the strong likelihood Bitcoin is going to go up in price, perhaps the 100,000 by the end of this year, perhaps even more. So we all already know that, but the variable in this equation, the X factor is how much can these Bitcoin miners utilize the infrastructure they already have to access to power they already have for this additional play, which is data centers and high performance compute. Now, as it relates to Bitcoin and sort of excitement over Bitcoin and the robustness of its price moves, you can see that Bitcoin ETFs have recovered recently. So we had the largest single day BTC ETF inflow since June 5th. Yesterday with over 400 million inflows into the recently launched Bitcoin ETFs. And with regards to investors kind of being very eager to get exposure to Bitcoin in a leveraged way through Bitcoin miners, I think one telltale sign that perhaps there's going to be a big influx of capital indies into these Bitcoin miners is where do we think the RSI is headed. So if we think the RSI is headed higher, so it becomes overbought, then these alternative exposure instruments like Bitcoin miners are going to likely follow in these overbought territory for Bitcoin. And Bitcoin RSI right now is in neutral territory. So despite the jump that we've seen, we went from in the 50s to 65,000 in Bitcoin's price, RSI is still neutral. Now, if you look at this chart and think, okay, we're going to overbought territory soon, then it's likely that Bitcoin miners having, you know, being an alternative method to gain exposure to Bitcoin will likely run as well. So hopefully that adds some color to Bitcoin miners and understanding, you know, why they are moving in the way they are moving, which is often counter. If you'd like to follow our portfolios, be sure to become a PIF member. With that, let's go to questions. Salaam Rakhan, Walikum Salaam Rashad, how do you determine that the rotation to low caps is near ending? Well, I think it's important to look at the relative valuations. And I think that so long as inflation in interest rates are top of mind for the market, then I think small caps will outperform. However, when the focus of the market goes from, you know, interest rates and inflation, when it goes from that to earnings and the health of the economy, that's when I think you want to focus on profitability. So when we're in a, when the economy is strong or relatively strong, then you want to focus and we think that, you know, liquidity is on its way, then prioritizing growth, I think, is a good strategy. However, when we anticipate a recession or we're in a recession, then prioritizing profitability, I think is the way to go. So right now, I think that small caps still have a lot of room to run. It still seems to be the case that earnings are coming in relatively strong and forecasts for earnings are relatively robust. It still seems to be the case that a recession, if it happens, will be a mild one and that interest rates are likely to come down in the coming period and therefore prioritizing growth, which smaller caps do excel at, I think is the right strategy for this particular period in the market cycle. Amir Ali asks, Salaam Alaykum, where can great videos always? Thank you. Alaykum Salaam, glad to be part of the PI of community. What's the thesis for taking profits from Tesla, which is a long term hold, only to buy it again and average up. So I think that for now we're holding Tesla into earnings. I think earnings will be strong. I think we may have our run up prior to earnings after earnings, but at which point, I think depending on what we hear during earnings and what we hear about the upcoming global taxi event, we may take profits. So had the robot taxi event remained on August 8th, as initially scheduled, my plan was to sort of buy the rumor, sell the news. So if we got a run up prior to the August 8th event, I was going to shave some of my position and then buy after the August 8th event. Now that it's been pushed out, depending on how much it has been pushed out and what the stock price movement is after earnings, we'll see whether we shave some, take some profits or not. Nevertheless, Tesla remains regardless. Tesla remains a long term hold for us. So it's not really something that's keeping me up at night. If the opportunity presents itself, we'll do a swing trade, but if it doesn't and it's not obvious enough, then we're fine with just holding. So with that guys, do leave a like. I really appreciate it. Until next time, make sure to take care of yourself, salamu alaykum and peace be upon you all.