- Despite Bitcoin spot ETFs launching, Bitcoin-adjacent stocks like MicroStrategy (+12%) are rallying.
- These companies offer more than just Bitcoin exposure, including software development and cash flow generation.
- Institutional investors with restrictions on spot ETFs might see miners and firms like MSTR as alternatives.
Bitcoin’s recent rally above $45,000 is fueling a rebound in “Bitcoin-adjacent” stocks, even with the arrival of long-awaited Bitcoin spot ETFs. These companies, often seen as indirect ways to gain exposure to cryptocurrency, are outperforming the market despite the new competition.
This bullish trend might seem counterintuitive with readily available Bitcoin ETFs now in play. However, experts point out several advantages that traditional Bitcoin companies still hold.
Firstly, these companies offer more than just pure Bitcoin exposure. MicroStrategy, recently rebranded itself as a Bitcoin development company, highlighting its software development capabilities and ability to generate cash flow.
This diversification can be attractive to investors seeking more than just price appreciation.
Secondly, some institutional investors are restricted from directly investing in Bitcoin spot ETFs due to internal regulations. These limitations make Bitcoin miners and companies like MicroStrategy alternative avenues for gaining exposure.
Vanguard, a major asset manager, exemplifies this preference, holding significant positions in Bitcoin miners and MSTR while avoiding spot ETFs.
“Avoid bitcoin like the plague,” John Bogle said in 2017.
Spot Bitcoin ETFs excluding Grayscale’s GBTC have surpassed MicroStrategy’s holdings, amassing over 192,000 BTC despite their recent launch. These ETFs provide easy access to Bitcoin but haven’t triggered concerns about network concentration because Bitcoin remains widely distributed across numerous holders.
While GBTC holds a larger sum (currently 470,000 BTC), its holdings have decreased due to profit-taking. Experts suggest that even with these large holders, Bitcoin’s network isn’t at risk due to its diverse ownership structure.
Despite the recent surge, analysts caution that volatility remains inherent in Bitcoin-adjacent stocks. Their fortunes are still closely tied to Bitcoin’s price movements, and the arrival of spot ETFs could introduce new competitive dynamics.
The recent rally in Bitcoin proxy stocks suggests that these companies can still thrive alongside spot ETFs. Their unique value propositions, such as software development and cash flow generation, offer distinct advantages for certain investors.