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2 crypto mining stocks to consider amid recent Bitcoin price weakness - JPMorgan

Published 04/16/2024, 12:37 PM
© Reuters.
RIOT
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With the looming "halving" set to slash mining rewards by half, crypto miners are still pretty bullish about Bitcoin's long-term game and the broader crypto scene. They're switching to more efficient mining machines, trimming costs, seeking out cheaper power sources, and even looking into mergers and acquisition opportunities to stay competitive.

A new report from J.P. Morgan sheds light on the perspectives of CEOs from major Bitcoin mining companies as they approach the major event. The document captures a general sense of optimism among industry leaders from companies like Cipher Mining (NASDAQ:CIFR), Riot Blockchain (NASDAQ:RIOT), and Bitdeer Technologies, despite the upcoming challenges that the halving poses to mining profitability and operational efficiency.

“We think recent weakness offers an attractive entry point, and are especially bullish on RIOT and IREN, which we think offer attractive relative valuations,” analysts wrote in a note.

The report details that CEOs are "increasingly investing in advanced technological capabilities, including AI, to optimize mining efficiency and energy consumption." 

Contrary to popular belief, this upcoming halving probably won't lead to a big drop in the network's hashrate. After the first three Bitcoin halvings, the hashrate fell by 25%, 11%, and 25%. It seems a lot of analysts and miners are expecting—or maybe even hoping for—a similar decrease this time around.

Also, the hashrate is expected to recover quickly from this minor dip. In the past three halvings, the network bounced back to its pre-halving hashrate levels in an average of just 57 days.

The document also quotes insights on the regulatory environment: "CEOs are closely monitoring regulatory developments, which are increasingly seen as a significant factor influencing market dynamics and investment decisions."

Crypto miners’ executives are implementing strategies to increase operational efficiency, expand mining capacity, and secure advantageous energy contracts to offset the expected decrease in mining rewards. 

Furthermore, there is a focus on leveraging technological advancements, with several companies investing in AI and other innovative technologies to maintain a competitive edge.

The report also points out the financial strength of these companies, observing that many have kept their balance sheets healthy with minimal debt. This strong financial footing puts them in a good position to cope with the economic effects of the halving. 

Moreover, these companies are diversifying their investment strategies, venturing into other cryptocurrencies, and exploring blockchain-related projects beyond just traditional Bitcoin mining.

Regarding the economic landscape, one section notes, "The halving event is seen as both a challenge and an opportunity, with potential for market consolidation providing opportunities for well-capitalized firms to expand their market share."

 

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