Public miners are generating alpha and are more volatile than Bitcoin.

  • MARA and HUT generated the most alpha over Bitcoin YTD.
  • BTBT, RIOT, and HIVE failed to generate positive alpha over Bitcoin YTD.
  • All miners have a beta of greater than 1 YTD.

The purpose of this article is to provide an overview of the alpha and beta of publicly-traded miners.

What do alpha and beta mean?

Alpha is a statistic that measures the over or underperformance of an asset versus an index. An alpha value of +5 or -5 would indicate the investment performed 5% better or worse, respectively, than the index. Essentially, alpha is measuring the excess return over the index. Traditionally, for stocks, alpha is compared with the S&P 500. But in our case, mining stocks are compared with Bitcoin.

Beta is a statistic that measures the volatility of an asset in comparison with an index. A beta value of 1 indicates that the price action of an asset is the same as the index. A beta value of less than 1 means that the asset is less volatile than the index and a value of greater than 1 means that the asset is more volatile than the index. For instance, a beta value of 1.5 implies that an asset is 50% more volatile than the index. Sometimes, beta is negative, meaning the asset and index move in opposite directions, which indicates a negative correlation.

The limitations of alpha and beta include variability (depending on period selection) and reliance on historical data (past performance is not indicative of future performance).

Mining alpha and beta

Tracking the alpha and beta of miners, compared to Bitcoin, can provide investors an overview of the excess returns and volatility of their investment. If a particular mining stock exhibits weak alpha and high beta, then simply holding Bitcoin is a superior strategy. Unsurprisingly, over a long period, miners are generating alpha and carry more volatility than Bitcoin.

Year to date, MARA generated the highest alpha of 294, representing an excess return of 294% on top of Bitcoin’s humble 107% return. On the other hand, BTBT, RIOT, and HIVE failed to generate positive alpha, despite seeing their share price increase (except BTBT). However, all miners, except BTBT, generated positive alpha over the one-to-three-year time frame. Betas for all miners are above 1, indicating that miners are more volatile than Bitcoin and offer a higher return potential.

The table below depicts the alpha and beta of the miners by period.