Summary CoinShares Bitcoin Miners ETF shares have plummeted nearly 40% in two months, significantly under-performing both the US equity market and Bitcoin. Miner volume share has spiked to 15% in 2023, highlighting a shift in Bitcoin adoption and a lack of on-chain usage. Despite Bitcoin's price correction, the global hash rate continues to rise, exacerbating the economic challenges for miners due to decreasing block subsidies. Even though WGMI is clearly allocating more toward miners that are prioritizing HPC/AI services, the largest holdings are still highly reliant on mining for top line revenue. When I last wrote about the CoinShares Bitcoin Miners ETF ( WGMI ) for Seeking Alpha, the fund was trading near $22 per share. In a little over two months, WGMI shares have a negative total return approaching 40% and have drastically under-performed both the US equity market and the top digital asset by market cap: Data by YCharts In my late January article covering the fund, I highlighted the potential headwinds facing the mining-turned-HPC companies in the public markets. The takeaways from that piece were largely hypothetical. So in this update, we'll dig a little deeper into the raw data and highlight some very real headwinds these companies face through their primary revenue segment - mining Bitcoin ( BTC-USD ). Miner Volume Share Is Spiking In the chart below, I've taken out data for both 2009 and 2010 because they skew the chart due to how little adoption of Bitcoin there was at that time. The average miner share of volume was almost 95% in 2009 and 60% in 2010. By 2011, that average fell all the way to 19.3%. This metric should theoretically fall over time as users engage with the network to a larger degree. IntoTheBlock, Author's Chart During the 8 years between 2012 and 2019, miner share of volume averaged 13.2%. Miner volume share then dropped all the way to 3.6% in 2022. This was very much viewed as normal and beneficial to the broader network. Again, in an environment where Bitcoin adoption continues to grow on-chain, miner share of volume should go down. However, in the last three years, we've seen the opposite happen. The average for 2023 spiked up to 11.5%. Last year, the average hit 15% - the highest miner volume share reading since 2015. And through the first quarter of 2025 it doesn't look like all that much has changed. This is indicative of a larger problem that I have been pointing out through Seeking Alpha articles for at least the last year; namely, that off-chain 'adoption' of Bitcoin moves BTC-based activities largely off-chain. This squeezes the miners who have an economic incentive to secure the blockchain. Hashprice Keeps Falling CoinMetrics In spite of a Bitcoin price that has corrected from all-time highs, global mean hash rate continues to grind higher month after month. At the end of March the 30-Day Average mean hash rate was 817 EH/s. Dollar-denominated hash price ended the month at a little over $46 per PHS/Day. This is within sniffing distance of an all-time low, which would almost certainly be triggered by a deeper drop in the price of BTC: 5 Year BTC Hash Price (HashRateIndex) The fundamental problem is that the block subsidy from mining goes down over time. Thus, transaction fees must ultimately become a larger share of mining rewards than the block subsidy. IntoTheBlock, Author's Chart During Q1-25, daily revenue from transaction fees averaged 1.35% - this was the lowest level since Q3-2018. On April 1st, the median transaction fee on the Bitcoin network was 36 cents. It's perhaps easy to hand wave away the lack of fees paid by Bitcoin users as 'FUD,' but someone must pay to secure this network. If it isn't users paying directly, it's somebody else. And what we've seen over the last few years is the ability of public mining companies to raise capital through debt and dilution to fund rapid exahash growth while operating at steep losses. This squeezes out home miners and hobbyist miners and presents long term centralization risks. Most WGMI Stocks Still Primarily Mine BTC Ultimately, there probably has to be a balance between network usability and network profitability since such a large share of global exahash is operated by publicly listed mining companies. That figure generally falls somewhere between 20-25% of global exahash. While we certainly wouldn't want median fees to be so high that most on-chain holders would be priced out of using the network, we also need miners to have an incentive to hash. As I've laid out in a prior WGMI article , the fund's management seems keenly aware of the problematic economics of mining and has very much shifted toward a more HPC-based holding allocation than a pure-play mining allocation. Meaning, WGMI has a larger allocation to miners with large HPC/AI ambitions rather than those that have steadfastly remained focused on mining. We can see this even more clearly through the change in the top holdings in just the last two months: WGMI Top Ten Holdings (Seeking Alpha) For instance, CleanSpark ( CLSK ) - a company focused on mining - was a top 5 WGMI holding back in late-January and now it doesn't even crack the top 10 despite having the fifth largest mining market cap and second largest exahash capacity in the public markets. For a fund that claims to allocate to Bitcoin miners, this is quite telling. Furthermore NVIDIA ( NVDA ), a company that doesn't mine Bitcoin at all, is now a top 5 holding with a 5.3% allocation in a Bitcoin mining-themed ETF. Despite what I view as a clear pivot in strategy from mining to HPC services, WGMI's top holdings are still very much reliant on BTC mining for top line revenue: Year Ended December 2024 Self-Mining Revenue Total Revenue % From Self-Mining IREN Ltd ( IREN ) $113.5* $116.5* 97.4%* Core Scientific $408.7 $510.7 80.0% Riot Platforms $321.0 $376.7 85.2% Cipher Mining $151.30 $151.30 100.0% Source: Company Filings, revenue in millions. *3 months ended December 2024 I'm not including NVDA in this table for obvious reasons. But the table speaks for itself; despite plans to grow HPC/AI services, these companies still generated the overwhelming majority of their top line revenue from Bitcoin mining. Core Scientific generated just 6% of its total revenue from HPC hosting last year. Data by YCharts Those stocks in the chart above collectively account for 48.6% of WGMI AUM and yet none of them were able to produce a positive operating income in 2024. To be fair, the verdict is technically still out on IREN, but the sector trend is clear. Closing Takeaways WGMI a confusing fund. Bitcoin mining is in the name of the fund and most of the large holdings generate most of their top line revenue from Bitcoin mining - yet there is clearly allocation favor being given to the companies that want to get into HPC/AI or are already in those spaces to a small degree. The fact that most of these companies still derive their revenue from mining anyway should not be ignored due to the worsening fundamentals of that business. Hash rate keeps grinding higher, hash price grinds lower, and fees paid to miners through real usage keeps eroding. It's a fairly brutal setup and not one that I would say justifies a position in the fund.
