Cryptocurrencies rallied sharply last month, and while many still have a long way to go to regain lost luster, July’s strength could be a sign of things to come.
Big Names Fuel Crypto Rebound
Add to that, some of crypto’s biggest names, including bitcoin and ether, contributed to the July upside. Should the titans of the digital asset universe continue to recover, it could provide support to exchange-traded funds such as e.g. VanEck Digital Assets Mining ETF (DAM ).
As the name suggests, DAM’s selection consists of cryptocurrency miners, including those who mine bitcoin – meaning that ETF, although equity-based, is correlated to crypto price action. So much has been exhibited in recent weeks, such as DAM is up 25.48% in the past month, or roughly quadrupling the S&P 500’s gain over the same period.
Potentially add to the lure of DAM is that recent carnage in the crypto space separates the wheat from the chaff, helping investors identify challengers and pretenders in the industry.
“Several bankruptcies across the crypto-lending ecosystem, including Voyager, Vauld, Zipmex, Three Arrows Capital and Celsius, put an estimated $5 billion hole in the firm’s crypto balance sheet. But the pain led to consolidation, led by buyers FTX and Nexo, giving investors some confidence that a buyable bottom has formed,” noted Matthew Sigel, VanEck head of digital assets research.
It is clear that DAM’s 24 stocks are heavily populated by growth stocks, which settled down through the first half of 2022. However, growth stocks are on the rise again. If renewed risk appetite proves durable, it could provide support for more upside DAM and its member companies.
“Meanwhile, along with falling commodity prices and better risk appetite in general, we observed significant crypto-securities posted in the chain of collateral BTC and ETH positions in DeFi, which significantly lowers the levels at which material liquidations can occur,” Siegel added.
Another point in favor of DAMalthough they are longer, many bitcoin miners, including those who live in VanEck, are ETF, is increasingly embracing renewable energy. It is a two-fold advantage for these companies. First, it lowers energy costs and can increase profits. Second, bitcoin miners’ embrace of clean energy can improve their environmental, social and governance (ESG) and sustainability resumes, potentially opening up the asset class to a wider range of growth-minded investors.
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