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Is it Better to Invest in Bitcoin or Bitcoin Stocks Like MARA or RIOT?

Article Courtesy of Anatolii Ulitovskyi

Bitcoin has been gaining widespread attention once again as it is up 137% over the past year.

The stocks of companies that mine and store Bitcoin have also had a great year, including Marathon Digital Holdings Inc. (MARA) and Riot Platforms Inc. (RIOT).

  • RIOT is up 246% over the last year.

  • MARA is up 220% over the last year.

Based on this recent performance it would seem that Bitcoin stocks provide higher returns than investing in Bitcoin directly. But that is only partially true. Whether Bitcoin stocks or Bitcoin performs better is largely dependent on the trend direction and time frame analyzed, according to data compiled by Trading.biz analyst Cory Mitchell.

During the 75% decline in Bitcoin’s price between November 10, 2021, and December 31, 2022, the stocks fared worse. MARA dropped 95% during that period, and RIOT dropped 91%.

During the rally from October 20, 2020, to April 14, 2021, Bitcoin rallied 428%. MARA returned 1413% and RIOT returned 1160% over that time frame. Both stocks witnessed even higher returns earlier in the rally.

Following April 14, over the next five weeks, Bitcoin fell 42%. MARA fell 49% and RIOT fell 52%.

Over and over again there is a pattern that shows when Bitcoin rises, MARA and RIOT tend to overshoot. They perform better but then drop harder when Bitcoin drops. While Bitcoin is a volatile asset, MARA and RIOT are even more volatile, sometimes moving as much as five times the amount that Bitcoin moves. For example, during the 2020/2021 rally, the stocks moved more than three times the amount of Bitcoin.

So which is better, Bitcoin stocks or Bitcoin itself?

Since the start of 2019, Bitcoin is up 907% while MARA is up 854% and RIOT is up 768%.

Bitcoin has been up as much as 1610% during that period while RIOT has been up as much as 4303% and MARA 4767%. As indicated, the drops were bigger in the stocks as well.

So the answer ultimately depends on the objectives of the trader or investor.

If looking to get in and out, bigger moves happen in RIOT and MARA. During uptrends, they tend to provide higher percentage returns. The getting-out is important though, as the drops are especially punishing in these stocks once the upturned ends.

For longer-term investors, analyzing returns over the last five years or more, Bitcoin has outperformed MARA and RIOT despite the much higher volatility of the stocks. That said, during that period there were times the stocks had much higher returns, but selling would have been required to lock those gains in. If holding, Bitcoin has been the better-performing asset.

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