There's a lack of exchange-traded bitcoin investment vehicles
The market has thirsted for a US spot bitcoin ETF for several years. The preferred way to get bitcoin exposure for many investors is not to purchase bitcoin directly but to buy into an ETF or other exchange-traded investment vehicles. Such an investment structure is more in line with existing regulations for investment companies. Also, it allows people to get bitcoin exposure through their IRAs and similar tax-advantageous investment accounts.For people not looking to hodl bitcoin directly, the best investment product is undoubtedly a spot ETF, but with no spot ETF in sight in the US, what opportunities are there for Americans who want indirect exposure to bitcoin?Several bitcoin futures ETFs have been listed in the US, but they come with high costs since the futures contracts are usually priced higher than bitcoin in the spot market. The Grayscale Bitcoin Trust (GBTC) has also been an alternative for several years, but it has failed to track the bitcoin price and currently trades at a significant discount to its bitcoin holdings.Due to the lack of exchange-traded bitcoin investment vehicles, some public companies have emerged to serve this function for bitcoin-thirsty investors. The most notable example is Microstrategy, which has amassed almost 130,000 bitcoin and become the largest bitcoin hodler of any public company by far.Buying Microstrategy's stock purely as a bitcoin proxy is not viable since the company has a significant non-bitcoin business that will impact the stock's direction.So, all of these indirect bitcoin investment vehicles come with their drawbacks. Which other opportunities exist? Enter public bitcoin miners.Public miners as bitcoin investment vehicles
Because of the lack of bitcoin investment vehicles, bitcoin miners are taking advantage of their continuous inflow of bitcoin and correlation to the bitcoin price, hoping to serve as bitcoin investment vehicles for investors who want to get indirect exposure to bitcoin.This strategy allows miners to attract new investors who invest in these companies to get bitcoin exposure. Because of this investor demand, several mining companies try to stay as correlated as possible to the bitcoin price, and the best way to do this is to amass massive amounts of bitcoin. Therefore, many public miners have explicitly stated that they intend never to sell the bitcoin they mine. This strategy is called the mine-to-hodl strategy. Some public miners are more aggressive than others in their mine-to-hodl strategy. An example is Marathon, which even purchased 4,813 bitcoin at the end of December 2020, stating in a public filing that this purchase "established the company as one of the only pure-play bitcoin investment options". Marathon's strategy in marketing itself as a bitcoin investment vehicle has undoubtedly successfully attracted investors and pumped up their share price. Their stock has historically been valued higher than most other mining stocks, based on their operating hashrate and earnings. Marathon has a much larger share of institutional investors than the other mining companies, with 41%. Many of these investors, like Vanguard (9% of the shares), Blackrock (6%), and State Street (2%), want to have exposure to bitcoin without holding the asset directly. Since Marathon was one of the earliest miners to employ the mine-to-hodl strategy, it managed to attract these institutional investors. To sum up, miners have incentives to hodl bitcoin because it makes their stocks attractive to a more extensive investor base. But how are they able to hodl all the bitcoin they mine? Don't they have costs to pay?Miners raise capital to finance their operations without selling bitcoin
The biggest mining companies hodl enormous amounts of bitcoin, and they keep adding to their holdings every day. Using Marathon as an example, they have steadily increased their bitcoin holdings from below 5,000 in January 2021 to almost 10,000 now. Marathon, and many other miners, have kept all the bitcoin mined, never selling a single satoshi. They can do this by raising equity and debt to pay for operating expenses. The access to capital has drastically improved for miners over the past year, allowing miners to tap into various capital markets to finance their operations.Preview