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Valkyrie Bitcoin Miners ETF (WGMI - Free Report), which provides exposure to the bitcoin mining industry, more than doubled in the first month of 2023 and became the top-performing ETF of January.

The rally has been driven by bets that the Fed will soon wrap up its inflation-fighting campaign as inflation is cooling. This has pushed the bitcoin, the largest digital currency by market value, higher. In fact, bitcoin is racing ahead this year, surging 40% after its second-worst annual performance in 2022 when it crashed 64%.

Although most of the stocks in WGMI’s portfolio have delivered strong returns in the initial month, a few have more than doubled. These include Greenidge Generation Holdings (GREE - Free Report), Cipher Mining Technologies Inc. (CIFR - Free Report), Bit Digital (BTBT - Free Report), HIVE Blockchain Technologies Ltd. (HIVE - Free Report), and Marathon Digital Holdings (MARA - Free Report).

Consumer prices unexpectedly fell for the first time in more than two-and-a half years in December. The consumer price index dipped 0.1% in December after gaining 0.1% in November. It rose 6.5% year over year in December, down from a 7.1% year-over-year increase in November and a recent peak of 9.1% in June. The annual inflation growth was the smallest rise since October 2021. The so-called core inflation, which strips out volatile components such as food and energy prices, rose 5.7% from the year-ago level after 6% advance in November.

With inflation now showing signs of cooling in the United States, some market players are hopeful that central banks will start easing the pace of rate rises, or even slash rates. Per the CEO of crypto data site CryptoCompare, “Fed tightening seems to be lighter and inflation less of a risk.”

The Federal Reserve is set to shift down the pace of interest-rate hikes this year amid signs of slowing inflation. According to a Reuters poll, the central bank will end its tightening cycle after a 25-bps hike at each of its next two policy meetings and then likely hold interest rates steady for at least the rest of the year.

Let’s take a closer look at the fundamentals of WGMI.

WGMI in Focus

Valkyrie Bitcoin Miners ETF is an actively managed ETF that will invest at least 80% of its net assets (plus borrowings for investment purposes) in securities of companies that derive at least 50% of their revenues or profits from bitcoin mining operations and/or from providing specialized chips, hardware, and software or other services to companies engaged in bitcoin mining. Valkyrie Bitcoin Miners ETF holds 24 stocks in its basket with a double-digit concentration on the top firm.

Valkyrie Bitcoin Miners ETF has amassed $4 million in its asset base while trading in an average daily volume of 13,000 shares. It charges 75 bps in annual fees.

Best Performing Stocks of WGMI

Greenidge Generation is a vertically integrated bitcoin mining and power generation company. It has an estimated earnings growth of 99.4% for this year and has a market cap of $37.7 million. The stock makes up for a 4.6% share in the WGMI basket and has skyrocketed 203.3% this year.

Greenidge Generation carries a Zacks Rank #3 (Hold) and a VGM Score of B.

Cipher Mining is an industrial-scale bitcoin mining company. The stock has soared 162.5% so far this year and accounts for a 5.1% share in the ETF.

Cipher Mining delivered an earnings surprise of 14.29% over the past four quarters. It has a Zacks Rank #3.

Bit Digital is an emerging bitcoin mining company. It has an estimated earnings growth rate of 29.4% for this year.

Bit Digital jumped 143.3% in January and makes up for a 5.6% share in the WGMI basket. The stock has a Zacks Rank #3 and a Growth Score of A.

HIVE Blockchain operates as a cryptocurrency mining firm. The company validates transactions on blockchain networks, as well as provides crypto mining and builds bridges between crypto and traditional capital markets. HIVE Blockchain has rallied 136.8% in the first month of 2023 and makes up for 7.9% in the WGMI portfolio.

HIVE Blockchain delivered an earnings surprise of 21.25% over the past four quarters and has a Zacks Rank #4 (Sell).

Marathon Digital is a digital asset technology company, which mines cryptocurrencies, with a focus on the blockchain ecosystem and the generation of digital assets. The stock jumped 134.5% and accounts for a 7.7% share in the ETF.

Marathon Digital has an estimated earnings growth rate of 120.2% for this year and carries a Zacks Rank #3.

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