What is the WGMI ETF?
Everything About the WGMI ETF: A Deep Dive into the Crypto-Mining ETF
In the growing ETF market, there are more and more specialized funds that allow investors to focus on specific niche industries. One of these niche funds is the Valkyrie Bitcoin Miners ETF (WGMI), an exchange-traded fund centered on companies involved in Bitcoin mining and related activities. In this article, we take a comprehensive look at the WGMI ETF, examine its structure, holdings, risks, opportunities, and its role in a diversified portfolio.
1. The Issuer and Background of the WGMI ETF
The WGMI ETF was launched by Valkyrie Funds LLC, a relatively young but ambitious provider of investment products that focus on the cryptocurrency sector. Valkyrie Funds was founded in 2021 and quickly made a name for itself as one of the few companies to launch specialized cryptocurrency ETFs.
The Valkyrie Bitcoin Miners ETF specifically targets companies engaged in the production of Bitcoin, commonly referred to as mining. The ETF was launched in February 2022 and is traded under the ticker symbol WGMI. In the crypto world, “WGMI” stands for “We’re Gonna Make It” — a phrase symbolizing optimism that investments in cryptocurrencies and their infrastructure will pay off in the long run.
2. Profile of the WGMI ETF
2.1. Objective of the ETF
The main objective of the WGMI ETF is to provide investors with diversified exposure to companies directly or indirectly involved in Bitcoin mining. This includes companies that mine Bitcoin, manufacture mining hardware, or offer services to the mining industry.
Another important aspect of the ETF is its focus on sustainable energy usage. Around 80% of the companies included in the fund already rely on renewable energy sources, making the ETF attractive to environmentally-conscious investors.
2.2. Cost Structure and Fund Size
The expense ratio of the WGMI ETF is 0.75%, meaning that 0.75% of the invested capital is used annually to manage the fund. This expense ratio is in the middle range compared to other niche ETFs.
As for the fund’s size, WGMI is relatively small. As of this writing, the fund manages around $50 million in assets, showing that it attracts a specific but growing investor base.
2.3. Performance
Since the WGMI ETF was launched in February 2022, there isn’t a long history to assess its long-term performance. However, the fund has experienced significant fluctuations in its early years, driven mainly by the volatility of the Bitcoin market. Investors should be aware that the ETF’s performance is closely tied to Bitcoin price swings and energy prices, as both factors significantly impact the profitability of Bitcoin mining.
3. Holdings of the WGMI ETF
The WGMI ETF invests in a mix of well-established and emerging companies in the Bitcoin mining industry and related sectors. Below are some key holdings that are regularly adjusted to maximize returns.
3.1. Riot Platforms Inc.
Riot Platforms Inc. (formerly Riot Blockchain) is one of the largest Bitcoin miners in the U.S. and a prominent part of the WGMI ETF. The company operates some of the largest mining farms in the country, often using renewable energy for Bitcoin production.
3.2. Marathon Digital Holdings
Another major company in the ETF is Marathon Digital Holdings, which is also one of the largest mining companies worldwide. Marathon aims to become the largest mining operation in North America and is heavily investing in hardware and contracts with energy providers to sustain operations.
3.3. Hive Blockchain Technologies
Hive Blockchain Technologies is another key company within the WGMI ETF. Hive operates mining farms in Canada, Sweden, and Iceland and focuses on mining Bitcoin and other cryptocurrencies using the Proof-of-Work mechanism. The company emphasizes using green energy sources for its operations.
3.4. Bitfarms Ltd.
Bitfarms Ltd. is a Canadian company specializing in Bitcoin mining and one of the largest miners in North America. The company distinguishes itself by operating its farms with hydroelectric power, making it one of the more environmentally-friendly companies in the sector.
3.5. CleanSpark Inc.
CleanSpark is another mining company included in WGMI’s holdings, with a strong focus on sustainable energy use. CleanSpark has earned a good reputation for being a pioneer in using clean energy to power its mining operations.
3.6. Other Holdings
In addition to these big names, the WGMI ETF holds positions in smaller, emerging mining companies and firms that provide mining hardware or develop technologies to make mining more efficient. These include companies like Argo Blockchain, Canaan Inc., and Iris Energy, all of which are positioning themselves in unique ways within the mining industry.
4. Opportunities and Risks of the WGMI ETF
4.1. Opportunities
One of the greatest opportunities presented by the WGMI ETF is the long-term growth potential of Bitcoin mining. As Bitcoin continues to be the leading cryptocurrency and mining operations expand in various regions globally, demand for mining services and technologies could increase. The ETF offers investors the opportunity to benefit from this growth.
Another advantage of the WGMI ETF is its diversification within the niche Bitcoin mining industry. Instead of investing in individual mining companies, investors can gain exposure to a range of companies and business models, all linked to blockchain technology and mining.
4.2. Risks
Like any investment in cryptocurrencies, the WGMI ETF comes with significant risks. The biggest risk is the volatility of the Bitcoin market. Since the value of mining companies is closely tied to the profitability of Bitcoin mining, price swings in Bitcoin can heavily impact the ETF’s performance.
Another risk is regulation. With governments worldwide increasingly scrutinizing the Bitcoin market, stricter regulations could make mining more difficult or costly. Energy prices also play a crucial role, as mining is highly energy-intensive, and higher electricity costs could reduce companies’ profitability.
5. WGMI in a Portfolio
The WGMI ETF is especially suited for investors who already have a diversified portfolio and want targeted exposure to the cryptocurrency sector, particularly Bitcoin mining. Since the ETF is highly specialized, it should not be the core of a portfolio. Instead, it can serve as a complementary position, adding a unique asset class to a well-rounded investment strategy.
6. Conclusion
The Valkyrie Bitcoin Miners ETF (WGMI) is an exciting fund for investors looking to bet on the long-term potential of Bitcoin mining. With a carefully selected mix of leading companies in the mining sector, the ETF offers a way to benefit from the growing infrastructure surrounding Bitcoin. However, investors should not overlook the risks, especially the volatility of the Bitcoin market and the dependence on energy prices.
For those who believe in the future of Bitcoin and its mining ecosystem, the WGMI ETF presents a promising investment vehicle that offers a unique opportunity to tap into this niche industry.