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).
I’m bullish on WGMI based on its intriguing risk/reward profile in the event of a Trump victory. Plus, sell-side analysts forecast a potential upside of nearly 100% for this tiny ETF over the next 12 months.
What Is the WGMI ETF’s Strategy?
According to the fund’s sponsor, WGMI “is an actively managed ETF available through Nasdaq that invests in public companies in the bitcoin (BTC-USD) mining industry.”
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.”
There are many crypto ETFs out there that invest in companies involved in the crypto industry, but WGMI has the clearest and most singular focus on Bitcoin miners. I believe this gives it the highest potential upside if Trump wins, as I’ll discuss below.
Bitcoin Miners Face Challenge
To understand why WGMI might benefit from a Trump victory, it’s crucial to understand the current challenges facing Bitcoin miners. Bitcoin is down 23.2% from its 2024 highs, and miners are also earning less Bitcoin for the same work after the Bitcoin halving in April.
Additionally, Bitcoin miners are contending with a fairly hostile regulatory climate under the current administration. This summer, the Biden administration proposed a 30% excise tax on cryptocurrency miners. The administration has a negative view of the Bitcoin mining industry, considering its high energy usage harmful to the environment. This tax serves as a penalty, even though many Bitcoin miners use renewable energy or help utilities by providing baseload demand for power during non-peak times.
While this tax may not come to fruition, it has cast a gray cloud over the sector and shows that the current administration is not a fan of Bitcoin miners or their business model. WGMI is down 20.9% over the past three months, roughly coinciding with the time frame that this idea was floated. To clarify, part of the decline is due to the drop in Bitcoin’s price, but there’s no doubt that regulatory uncertainty is also putting pressure on the sector.
Why a Trump Win Matters
Conversely, former President and current Republican Presidential candidate Donald Trump is clearly a fan of cryptocurrency and has embraced Bitcoin miners with open arms.
In this regard, Trump met with executives from a wide variety of mining companies like Marathon Digital (MARA), Riot Platforms (RIOT), Cleanspark (CLSK), and others at his Mar-A-Lago base in June, where he listened to their concerns and voiced his support for the industry. After the meeting, Trump declared, “We want all remaining Bitcoin to be MADE IN THE USA!”
While this would not be feasible from a logistical perspective as Bitcoin is a decentralized network and Bitcoin miners operate all over the world, the key takeaway is that Trump’s enthusiasm for the industry represents a significant shift from the Biden administration’s stance. Meanwhile, these same crypto executives have been trying to meet with the Biden administration for years, to no avail.
Additionally, Trump was a keynote speaker at the Bitcoin 2024 conference in Nashville this summer, where he called for the United States to become a “Bitcoin superpower” and the “crypto capital of the planet.” He also announced that if elected, he would create a “strategic reserve” of Bitcoin (similar to the strategic petroleum reserve) and stockpile the asset as a matter of national security and interest.
To be clear, this is a long way from coming to fruition, but it would clearly be a boon to the price of Bitcoin and for Bitcoin miners.
The Trump campaign has also received support from former Democratic Presidential candidate Robert F. Kennedy Jr., who has urged his backers to support Trump. A long-time advocate of Bitcoin, RFK Jr. not only holds Bitcoin himself but has also purchased it for each of his children. His new involvement with the Trump campaign will likely further influence Trump’s views on Bitcoin.
Based on his stated policies and his general embrace of the industry and miners specifically, a Trump electoral victory would clearly be a tailwind for WGMI and the stocks of the Bitcoin miners it holds.
And it’s not as if a Trump victory is a farfetched scenario. While he isn’t the frontrunner at this point in time, the prediction market Polymarket places Trump’s probability of winning in November at 49% at the time of writing. This is just one percentage point behind his opponent Kamala Harris following the Presidential debate on September 10th, so the race is too close to call.
WGMI’s Holdings
WGMI is a concentrated bet on Bitcoin miners, and as such, it is not a very diversified fund. However, it does provide more diversification than simply investing in an individual Bitcoin miner, which could expose an investor to undue operational risks.
The fund holds 19 stocks, and its top 10 holdings account for 76.2% of assets.
In addition to the major Bitcoin miners like Marathon Digital, Riot Platforms, Cleanspark, and the rest, it’s worth noting that WGMI also has two small positions in non-Bitcoin miners.
It holds semiconductor giant (NVDA), whose graphic processing units (GPUs) are utilized by miners to mine for Bitcoin. It also owns Taiwan Semiconductor (TSM), the company responsible for manufacturing these advanced chips.
Expense Ratio
WGMI charges an expense ratio of 0.75%, meaning that it charges investors $75 in fees for every $10,000 invested annually.
This is a fairly steep expense ratio and a major drawback to investing in WGMI, but as a tiny fund from a small sponsor with just over $100 million in assets under management, it’s somewhat unsurprising.
If the fund surges based on a Trump victory, few investors are likely to overlook the high expense ratio. If the thesis doesn’t work out, this high expense ratio could be a bitter pill to swallow, which is something investors must consider.
Is WGMI Stock a Buy, According to Analysts?
Turning to Wall Street, WGMI earns a Strong Buy consensus rating based on 14 Buys, six Holds, and a zero Sell rating assigned in the past three months. The average WGMI stock price target of $32.53 implies a 98.47% upside potential from current levels.
Not for the Faint of Heart
WGMI is highly volatile and reacts strongly to the price action of Bitcoin. Plus, a Trump loss in November would likely send the shares of miners significantly lower, so an investment in this ETF isn’t for the faint of heart. I believe the industry would survive a Harris presidency and eventually overcome many of the challenges, but it would likely be a long slog for several years.
But for risk-tolerant investors, WGMI presents an intriguing risk/reward profile, especially with Polymarket odds indicating that Trump is virtually in a dead heat with Harris.
I’m bullish on WGMI based on the likelihood that a Trump win will be a major catalyst for Bitcoin miners in the United States. Such a win would unshackle them from onerous taxes and regulations and treat them as innovative technologists rather than nuisances that should be reprimanded with punitive taxes. Furthermore, analysts see a potential upside of nearly 100% from current levels.
