WGMI: When Is It Better Than Bitcoin? Maybe Not Today

Summary WGMI works with a well-defined active investment strategy that selects the most representative companies in the Bitcoin mining ￰0￱ a dynamic sector, this makes WGMI competitive compared to passive competitors and/or stock picking. However, miners are heavily affected by the cyclical nature of BTC, alternating hyper-expansion cycles with hyper-correction ￰1￱ mistake lies in the fact that the market is considering as growth stocks those that can never truly be ￰2￱ Bitcoin Mining ETF ( WGMI ) offers an intriguing direct exposure to the shares of mining companies . I underline intriguing, because the management does not simply allocate resources with a market-weighted exposure in public companies in North America, but actively selects the most representative ￰3￱ problem is the cyclicality, in my view extreme, of the sector it operates in, which makes WGMI a speculative and/or tactical instrument for certain market phases; So the question is: are we in “those” market phases?

Yes, the cycle is positive, but the irrationality of the market lies in pricing WGMI’s holdings as growth, when they have a very divergent business ￰4￱ me explain ￰5￱ does WGMI do With its $225M of AUM, it invests at least 80% in companies that derive at least 50% of their revenues or profits from Bitcoin mining activity, excluding direct investment in Bitcoin BUT (attention) leaving up to 20% the possibility of investing in companies that hold BTC on their balance sheet (and up to 5% exposure in bonds of these companies). It is therefore a pure play mining ETF that offers this service at a TER of 0.75%. WGMI - Fund profile (Seeking Alpha) Its composition WGMI has less than 30 holdings , where the top 3 positions cover 43% of the portfolio, which gives it a unique verticality towards the Bitcoin mining ￰6￱ is its top 10 holdings: WGMI - top 10 holdings (Seeking Alpha) But let’s remember that the fund has a portfolio turnover of over 45%, as it is actively managed, and therefore rotates its holding distribution based on opportunistic logics.

A recognition to WGMI If there is one thing to recognize about CoinShares, it is that the strategy, although not complicated from the prospect, captures opportunities in the sector well when they arise, and although less distributed in number of holdings, I consider it a step above competitors ( FDIG ), but also compared to stock ￰7￱ by YCharts For example, it well intercepted the expansion of IREN: a company that went from a loss in 2024 to an accounting net income of $86.9M, with F25 revenue growing 168% YoY thanks to the development of its contracted renewable capacity in the USA and Canada, and indeed the AI cloud ￰8￱ - net income (Seeking Alpha) And note well, it has not always been among the top picks of ￰9￱ in this sector, I think we all agree that it is not enough to simply take the top picks of the last halving cycle and put them in a ￰10￱ by YCharts A dynamic approach to WGMI The monitoring drivers are always the same: energy-saving capacity – mining capacity – and% of product ￰11￱ are 3 components that give extreme cyclicality to mining companies; simply because they are based on a continuous demand for CAPEX but with scalability limited by the halving reward cut and therefore by the increase in hash rate.

Then, having BTC in holding, (in theory) companies expand the% of net income (accounting) in bull markets, and expand the guidance, and then shrink these variables in bear ￰12￱ by YCharts For example, RIOT, one of the main holdings of WGMI, is an easy example to bring up: it held in total HODL for 13 months (Feb 2024–Mar 2025), moving to positive accounting net ￰13￱ if you exclude BTC revaluation, RIOT remained operationally in loss (even without derivatives and settlement cost, -$50M). Then, it so happened that in Q2 2025 the company sold most of the production (Apr–Jun). Data by YCharts But this move theoretically exposed the company to strong cyclicality due to BTC ￰14￱ like a precious metals mining company with ￰15￱ practical terms, during bull markets it outperforms, because the market adjusts expectations (which were extremely low), and in bear markets instead it does the exact ￰16￱ Following the same logic used so far, WGMI’s holdings will certainly be closely connected with the Bitcoin ￰17￱ it is logical to think that in order to predict WGMI’s performance, one must be able to interpret the phase in which BTC is ￰18￱ by YCharts And as you will have understood from my research on Bitcoin, I maintain an optimistic view, especially looking at the long term.

Simply, the institutionalization process , at the base of which there is the GENIUS ￰19￱ looking more in the short term, simply also the Fed’s ￰20￱ easing with inflation still above target lowers the real yield of US Treasuries, makes the dollar weaker, and strengthens the role of scarce assets such as BTC and ￰21￱ by YCharts Risk Miners should outperform Bitcoin in bull markets like gold miners, the problem is the cyclicality of the sector, which shows up in bear markets, and let me say … in bull markets people don’t talk much about bear ￰22￱ by YCharts Beyond the fact that they are a highly energy-intensive sector, the problem is technological obsolescence and the halving, which respectively increase CAPEX and impact miners’ ￰23￱ you assume a growing hash rate, higher competition, margins remain compressed even while the price of BTC increases, but if the price goes up, the P/E goes up too, which typically in cyclical companies tends to remain more contained.

Well, today it is above 39x , but this is unusual for a cyclical sector, it is as if the market uses multiples (relative valuations) typical of a growth stock, when the accounting features would not place it in this ￰24￱ is why, in my opinion, exposing yourself to WGMI today does not ensure you a wide margin of safety, and exposes you to a more aggressive rotation risk, which makes it less attractive than its underlying commodity, ￰25￱ I think the business model of miners makes WGMI an extraordinarily high-beta tactical allocation instrument for the portfolio, but not a strategic fund in a portfolio perspective, as in my opinion the underlying, Bitcoin, could be ￰26￱ there is no concrete reason to assume the start of a negative cycle, but the lack of a “margin of safety” in WGMI makes it less ￰27￱ is why I think the right rating is HOLD, or rather HODL.