Summary CoinShares Bitcoin Mining ETF (WGMI) faces an identity crisis as holdings pivot from BTC mining to AI and cloud data centers. WGMI's top holdings are shifting assets to AI and cloud contracts, improving cash flow prospects after years of mining-related losses and dilution. The ETF's recent outperformance is tied to these strategic shifts, but its stated focus on BTC mining creates uncertainty for investors. Given the fund's unclear direction, I rate WGMI a neutral Hold until management clarifies its approach to balancing BTC mining and AI/cloud exposure. CoinShares Bitcoin Mining ETF ( WGMI ) has had a good 2025, on the heels of strategic pivots by its holdings. These take the holdings outside of WGMI's intended purpose, and that makes it tough to be sure of what kind of bet this ETF is: BTC mining or AI and cloud servers. Concept of the Fund Actively managed, WGMI invests in companies that either derive most of their revenue from Bitcoin ( BTC-USD ) mining or in developing some kind of good or service that enables BTC mining. This is a way to invest in the future of BTC, with extra upside from the success of the miners. Bitcoin miners are companies that, generally speaking, host and operate a fleet of ASIC machines, which are custom-made to meet the computational needs of solving a block on the blockchain. This earns them rewards that produce more BTC. ASIC miners are typically purchased in large volume and installed in large data centers. Few companies fit the description of a BTC miner, so WGMI has only 24 holdings overall, and the top ten holdings account for 90% of the portfolio. Top 10 Holdings (Author's Display of Fund Page Data) This means that the financial profiles of these holdings should tell us a lot about WGMI's viability as an ETF. Historical Results Since its inception in February 2022, WGMI is up about 73%, but most of these gains only occurred in the last few months. Prior to that, the fund had a losing record. WGMI Full Price History (Seeking Alpha) The reason is pretty simple. BTC miners are infamously unprofitable, and this owes to the never-ending arms race of mining computers. Part of this relates to Bitcoin's hash rate and how it affects mining. As summarized on SwanBitcoin.com: A higher hashrate indicates the need for more computing power, increased energy costs, and longer verification and transaction times. This results in slower and more expensive Bitcoin mining. This is a feature, not a bug, intended to make BTC more secure from attack by making the computational demands higher. Growth Of Hash Rate Over Time (CoinWarz) The trick for the miners is that they continually incur more capex to get more advanced ASIC hardware, which increases global participation in the blockchain, which increases the hash rate, and therefore increases the need for more computational power. It's a mouth that can never quite be fed. Each batch of ASICs is only truly competitive for a few years, and they aren't useful for any computing needs besides mining BTC. Miners have burned cash through ASIC capex well in excess of their operating cash flows, assuming OCF is even positive in the first place. This is easy to see if we sample the annual cash flow statements from the top three holdings. Cash Burn In Holdings (Cash Flow Statements In Annual Reports) As they run out of cash, they must sell more shares to raise capital. This dilutes existing shareholders and reduces the intrinsic value of an individual share over time, which will hurt the returns of ETFs that hold them. That explains WGMI's weak result until this year. Outlook and Risks The part of the results where WGMI became a net winner leads to a discussion about the fund's future: a transition from BTC mining to AI data centers. One might wonder why they would do that in 2025, the year that the federal government finally adopted a crypto-friendly stance, seen earlier with the passage of the GENIUS Act. It really comes down to the fact their mining sites, often consisting of large warehouses of hardware, have built up very efficient electrical capacity, and the data center needs of AI have created an alternative use for these assets. The holdings have made announcements of moving in the direction of supporting AI hyperscalers: IREN's $9.7B contract with Microsoft ( MSFT ) CIFR's $3B contract with Fluidstack BITF's conversion of their Washington site WULF's 25-year lease with Fluidstack HUT's sale of Canadian assets to TransAlta HIVE's long-term deal with Dell ( DELL ) I think these developments are good for a fund like WGMI, at least in the sense that there's more likely to be positive cash flow in the future with these types of deals. BTC mining was proving to be a tough business particularly after 2024's halving event hurt their production. Repurposing the assets for AI and cloud data centers is a model that's already been proved, and this shift explains why these stocks rose and pulled up WGMI too. Nevertheless, the fund's self-description is still about exposure to BTC mining, and so a moment of reckoning is ahead. ETFs often have to change their entire framing at moments like these, changing their name and ticker. If not, then it's possible that WGMI will double down and concentrate on stocks that retain their focus on BTC mining. Conclusion There is a fork in the road, where very good things and very bad things can happen. This depends on how WGMI's management wants to handle the split between BTC mining and AI/cloud opportunities. Because of this, I give the fund a neutral Hold. Management needs to be clearer on how they want to tackle the paradigm shift that occurred among its BTC miner holdings.
