A Donald Trump victory could ignite this Bitcoin ETF

While the upcoming U.S. Presidential election will likely be a catalyst for a variety of stocks and sectors, perhaps no ETF has more to gain from a potential Trump victory than the Valkyrie Bitcoin Miners ETF WGMI.

A Trump Win Matters

In June, Trump met with executives from several major mining companies, including Marathon Digital, Riot Platforms, and Cleanspark, at his Mar-A-Lago estate. During the meeting, he listened to their concerns and expressed his support for the industry. Following the discussions, Trump made a bold statement: “We want all remaining Bitcoin to be MADE IN THE USA!”

While this goal is logistically impossible due to Bitcoin’s prices and the global distribution of miners, the key takeaway is Trump’s strong endorsement of the industry, marking a clear departure from the Biden administration's approach. Notably, these crypto executives have been attempting to engage with the Biden administration for years without success.

Trump also delivered a keynote address at the Bitcoin 2024 conference in Nashville, where he advocated for the U.S. to become a “Bitcoin superpower” and the “crypto capital of the world.” He further announced plans to create a “strategic reserve” of Bitcoin, akin to the strategic petroleum reserve, if elected, positioning the asset as a matter of national security.

Though far from realization, these proposals could significantly boost Bitcoin’s value and benefit Bitcoin miners.

WGMI’s Holdings

WGMI (named for the saying “We’re All Gonna Make It,” which is popular with crypto users) invests at least 80% of its assets in companies that “derive at least 50% of their revenue or profits from Bitcoin mining operations and/or from providing specialized chips, hardware, and software or other services to companies engaged in Bitcoin mining.”

WGMI is a focused investment on Bitcoin miners, offering limited diversification compared to broader funds. However, it provides more diversification than investing in a single Bitcoin miner, which can subject investors to significant operational risks.

Bitcoin Miners Face Challenge

Bitcoin miners are facing a challenging regulatory environment under the current administration. This summer, the Biden administration proposed a 30% excise tax on cryptocurrency miners, reflecting its negative stance on the industry due to its high energy consumption, which is perceived as environmentally damaging. This tax is intended as a penalty, despite the fact that many Bitcoin miners use renewable energy or support utilities by providing stable power during off-peak times.

Although this tax may not be implemented, it has cast a shadow over the sector and underscores the administration’s lack of support for Bitcoin miners and their business model. WGMI has fallen 20.9% over the past three months, roughly coinciding with the proposal's introduction. While part of this decline is due to Bitcoin's price drop, regulatory uncertainty is clearly adding pressure to the sector.

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