WGMI: High Correlation To Bitcoin, Significant Downside Remaining

Summary The CoinShares Bitcoin Mining ETF offers pure-play exposure to North America's leading Bitcoin mining companies, crucial for blockchain transaction verification. WGMI is highly concentrated, with over 82% in its top ten holdings, notably Cipher Mining and IREN Ltd. The ETF exhibits high beta and volatility, with a standard deviation of 85% and annualized volatility of 80%, closely tracking Bitcoin price movements. Recent correlation to Bitcoin has decreased to 63%, but WGMI remains sensitive to further downside in the crypto market. Thesis The CoinShares Bitcoin Mining ETF ( WGMI ) is an equities exchange-traded fund. In particular, the ETF aims to: Gain pure-play access to North America's leading Bitcoin mining industry, a crucial component of the Bitcoin ecosystem. WGMI provides targeted exposure to the companies at the forefront of transaction verification, ensuring transparency and security on the blockchain. The ETF is dedicated to companies in the bitcoin mining industry and comes with a high beta to the S&P 500. Given the recent volatility in bitcoin and downward momentum for the crypto universe, we are going to take a closer look at this fund and its outlook in today's macro. Fund composition Let us start by looking at the holdings in this ETF: Holdings (ETF website / Author) The above table has been extracted by the author from the list present on the ETF's website . Note that the top ten holdings make up over 82% of the ETF, with a large concentration in Cipher Mining ( CIFR ) and IREN Ltd. ( IREN ). The fund is actively managed, with a reported 40% portfolio turnover; however, do note the universe of crypto miners is fairly limited. Before we take a close look at the balance sheets and income statements of some of the largest exposures here, let us establish the correlation to bitcoin for this ETF. Correlation to Bitcoin Let us look a little closer at how the ETF does versus an outright play on bitcoin via the largest ETF in the space, namely the iShares Bitcoin Trust ETF ( IBIT ): Correlations (testfol.io) It is interesting to notice the very high correlation of 70% during 2025, a correlation that has now moved down to 63%. While the correlation has diminished, the high-beta nature of the ETF is nonetheless there: Data by YCharts In the past three months, the S&P 500 ( SPX ) via its SPY ETF proxy is up 1.57%. Conversely, WGMI is down -20%, while bitcoin is down -35%. WGMI has a very high standard deviation and volatility, with the following metrics extracted from the Seeking Alpha ' Risk ' tab: Volatility (Seeking Alpha) The standard deviation is an astounding 85%, while the annualized volatility is 80%. While as of late the correlation to bitcoin has diminished, the fund beta and volatility are still very high and generally follow the bitcoin movement. If there is further downside in bitcoin, there is also substantial downside left in WGMI. Some financials and a potential transformation Let us look now at some financials for CIFR and IREN to better understand their revenue streams and profitability. Let us start with the CIFR balance sheet: CIFR Balance Sheet (SEC Financials) As of the latest financials posted to the SEC website, we can see the company running a high outright balance of roughly $170M in bitcoin, up from the prior year. A significant decrease in bitcoin prices would result in a lower asset value, thus a direct hit to income (unrealized, just like with Strategy). The CIFR income statement looks as follows: Income Statement (SEC Financials) For the nine months ending September 2025, the company's only source of revenue was bitcoin mining, which brought in $164M, but not enough to generate a positive net income given the cost structure. In fact, Cipher has never posted a positive operating income figure: Operating Income per Year (Seeking Alpha) However, the company is trying to change this by adjusting its long-term business model. Recently, the company has signed a deal with Amazon to provide data center computing power: Cipher Mining is shifting its focus from pure bitcoin mining to AI enabled data center infrastructure. The company has entered a 15-year lease agreement with Amazon, positioning its facilities for long term data center services. While this is a positive long-term, we are yet to see that cash flow hit the revenue line in the income statement and make a difference. Bitcoin is still the dominant force both on the asset side and on the income side. Now let us take a look at IREN. The balance sheet looks as follows: Balance Sheet (SEC Filings) IREN has a much larger balance sheet, with no bitcoin on the asset side as per the disclosures above. IREN is actually known for selling its bitcoin as it gains it, making it more of a pure miner rather than an accumulator of the cryptocurrency. The income statement for IREN is also different: IREN Income Statement (SEC Filing) IREN has a large revenue stream from bitcoin mining but also an AI cloud services revenue stream. Cloud is only 10% of the revenue stream as of the last quarter, but it is increasing. When looking historically, we can also see that IREN was operationally profitable just one year during its life as a company: Historic Operating Income (Seeking Alpha) The only time the company was profitable operationally was for the fiscal year ending June 2025, which coincides with the top in bitcoin prices. IREN has also signed a deal with one of the Magnificent 7 in terms of providing cloud infrastructure services: IREN Limited (NASDAQ: IREN) announced a multi-year agreement with Microsoft valued at approximately $9.7 billion to deliver GPU cloud infrastructure powered by NVIDIA GB300 GPUs. The partnership represents one of the largest AI infrastructure deployments announced this year and reflects the growing demand for high-performance compute. Under the agreement, IREN will deliver large scale GPU clusters accommodated within IREN’s liquid cooled data centers under construction at its 750 MW campus located in Childress, Texas. The GPUs will be deployed in 4 phases through 2026 (Horizon 1-4) and will collectively provide 200MW of critical IT load. The five-year contract includes a 20 percent prepayment and is expected to contribute roughly $1.94 billion in annualized run rate revenue once fully commissioned. While it is clear that IREN is diversifying, the operational income picture is not quite there yet in terms of seeing cloud revenues exceed the bitcoin mining ones. Bitcoin technical take There are two large bearish technical patterns forming on bitcoin: Bearish Flag From a technical standpoint, bitcoin is forming a bearish flag pattern: A bearish flag is a technical chart pattern signaling a brief pause in a strong downtrend, suggesting the downward trend will likely continue, acting as a continuation pattern where a sharp price drop (flagpole) is followed by a small, upward-sloping consolidation channel (the flag) with decreasing volume, before breaking lower again. A visual representation of a bearish flag pattern is as follows: Bear Flag (Technical Analysis) Now, let us take a look at what Bitcoin has been doing: Bear Flag Bitcoin (TrendSpider) While not every reader might be a fan of technical analysis, patterns usually are correct, especially when they present such a 'clean' take on a theoretical graph. Head and shoulders This is another technical trading pattern that can be 'seen' on the bitcoin charts: The Head & Shoulders pattern is a key chart formation in technical analysis that signals a potential market reversal from an uptrend to a downtrend. It consists of three peaks: a higher middle peak (the "head") flanked by two lower peaks (the "shoulders") and a support line called the "neckline." From a visual standpoint, the head-and-shoulders pattern looks like this: H-n-S Pattern (Corporate Finance Institute) The pattern is a bearish one, with most analysts anticipating a decline equal to the change from the neckline to the top. So if the security experienced a +20% gain from the neckline to the top of the head-and-shoulders pattern, then a forecasted -20% loss is penciled in when the neckline is broken. Currently the bitcoin chart looks as follows: Bitcoin price (Seeking Alpha) In our view, now that the $75,000 level neckline is broken, the bearish pattern is fully validated. On the downside, some analysts use the difference between the neckline and the top as a downside target. Conclusion WGMI is an equities ETF. The name aggregates bitcoin miners in an active portfolio, and its top ten holdings represent over 80% of the fund exposure. IREN and CIFR are currently 20% of the fund each, and the article discusses their income statement and balance sheets. WGMI is highly correlated to bitcoin and is set to follow the cryptocurrency lower, even as the underlying companies are trying to diversify away. We are a 'Sell' for this name, which will continue to follow bitcoin lower.