Bitcoin Halving: JPMorgan’s Surprise Picks for Miners
As the highly anticipated bitcoin halving rapidly approaches, the cryptocurrency mining landscape is preparing for a shakeup. JPMorgan, a renowned investment bank, has identified its top picks for public miners that are positioning themselves to weather the supply shock. Analyst Reginald Smith believes the halving will bring increased volatility and trading volume in both bitcoin and mining stocks.
Mining Companies Brace for Halving’s Revenue Reduction
The bitcoin halving, estimated to occur within the next few days, will significantly reduce the rewards given to miners for processing transactions on the bitcoin network. This will lead to a drop in mining revenue, forcing companies to prepare for the impact. Many publicly listed miners have already made substantial investments in new mining equipment and increased their electricity capacity. However, the uncertainty surrounding the halving has dampened the performance of mining stocks, with most down by double digits this year.
JPMorgan’s Bullish Outlook on RIOT and IREN
Despite the general downturn in mining stocks, JPMorgan maintains a bullish stance on Riot Platforms (RIOT) and Iris Energy (IREN). Smith believes that both companies are poised for significant growth in their hash rates and offer attractive valuations. Hash rates, a measure of computational power used for mining, are crucial for miners. Riot currently has a hash rate of 12.2 EH/s and is estimated to reach 28.4 EH/s by the end of the year, while Iris Energy is tracking towards 16.4 EH/s by year’s end.
Low Power Costs Boost Riot’s Earnings
In addition to hash rate growth, JPMorgan also highlights Riot’s low power costs. Electricity is the most significant operating expense for mining firms, and Riot’s power purchasing agreement gives it a competitive advantage. Smith explains that “RIOT enjoyed the lowest power costs per coin mined in 2023, while MARA had the highest power cost per coin mined due to third-party hosting fees.”
CleanSpark: A Potential ‘Great Halving Play’
Although JPMorgan has a neutral rating on CleanSpark (CLSK), Smith recognizes its potential as a strategic investment for the halving. He describes CleanSpark as a “great halving play” due to its efficient fleet, low production costs, and favorable hash rate comparisons. “We expect CLSK and RIOT to be the two lowest cost producers given their scale and attractive power contracts,” Smith asserts. While other mining stocks have struggled, CleanSpark has been a standout, with its shares up by more than 50%.
What is the Bitcoin Halving?
The bitcoin halving is a scheduled event that occurs approximately every four years, where the number of new bitcoins created as a reward for mining is cut in half. The current halving will reduce the reward from 6.25 bitcoins to 3.125 bitcoins. This supply reduction restricts the number of bitcoins available for mining and historically has boosted the price of bitcoin.
Analyst Commentary
Michael Bloom, a contributing reporter for CNBC, quotes analyst Reginald Smith regarding the future of bitcoin mining stocks: “With the bitcoin halving on the horizon, we expect heightened volatility and trading volume in both bitcoin and mining stocks. That said, we think recent weakness offers an attractive entry point, and are especially bullish on RIOT and IREN, which we think offer attractive relative valuations.”
Conclusion
As the bitcoin halving draws near, miners and investors are preparing for the impact on mining revenue and stock prices. JPMorgan’s analysis highlights Riot Platforms and Iris Energy as strong picks, while also acknowledging CleanSpark’s potential as a ‘great halving play.’ With increased volatility and trading volume expected in both bitcoin and mining stocks, analysts believe that the upcoming halving could provide opportunities for strategic investors.
Data sourced from: cnbc.com
