Investors in Bitcoin mining stocks are keeping a close eye on the cryptocurrency's price after the Securities and Exchange Commission's move to allow spot Bitcoin ETFs became selling news. The flagship currency briefly reached $49,000 after the ETF received regulatory approval last week. However, as the week progressed, Bitcoin erased its earlier gains, posting a modest 0.01% decline for the week. Cryptocurrency mining companies are currently feeling the pressure from this latest Bitcoin selloff. That's evident in the huge declines in Marathon Digital and Riot Platforms since the start of the week, with both down more than 20%. First, the hash rate (the computing power the Bitcoin network uses to process transactions) has been hitting record highs almost every week, putting pressure on miners' profits, according to JPMorgan analyst Reginald Smith. It is said that they are doing so. He said the network hashrate has increased by more than 30% in the past four months, paralleling Bitcoin's 157% rise in 2023. Second, investors are keeping an eye on the price of Bitcoin following the debut of the ETF. As soon as he rises to the $50,000 to $55,000 range, small miners may not have enough capital to grow and may find it difficult to sustain their operations. “Miners at the lower end of the cost curve, with limited debt and plenty of liquidity between Bitcoin and cash on their balance sheets, will fare best in 2024,” Compass analyst Chase White said. Probably.'' White. “But the middle of the year could be a tough time as miners play a prisoner's dilemma game of who has to turn off their machines and who doesn't.” “Older, less efficient miners are much less profitable, but they still make enough to stay online, hurting everyone's margins,” he said. “if [the bitcoin price] Below $45,000…only the newest and most efficient miners with the lowest cost power will be able to stay online. ” Bitcoin halving is when the reward for mining the flagship cryptocurrency is cut in half, as designed in Bitcoin's code to reduce supply. Because of the reduction in supply, halvings historically set the stage for big price increases over the next six to nine years. “But the reduction in rewards also means that miners' incomes take a hit. Overall, analysts are fairly optimistic that Bitcoin will rise as expected due to three key drivers: ETFs, halving, and potential interest rate cuts.'' ETF interest rate increases and rate cuts later this year The potential for Bitcoin to run much faster than the global hash rate could potentially alleviate much of this problem,” White said. . For that to happen, we need to get above $50,000, and we think we can get there.'' Compass White's current year-end price target for Bitcoin is $75,000. Mr White said private miners were likely to struggle the most because they had less access to capital than listed miners, which could sell shares on the market. He named Riot Platforms, Iris Energy, Cipher Mining, and Bitfarms as possible candidates. JPMorgan's top candidate is Iris Energy. While the firm is neutral on Cipher, CleanSpark and Riot, Smith said he has become increasingly constructive on Riot, which he sees as more actively traded and a long-term winner. Iris Energy and Cipher each fell more than 16% last week. In a note earlier in the week, Smith suggested there could be some weakness after the ETF approval. With the introduction of ETFs, institutional investors have another way to express their views on Bitcoin, so we believe it is more likely to be driven by technical selling pressure rather than fundamental miner economics. “We will consider any sale.” [in mining stocks] “As the ETF does not directly impact the mining economics or change competitive dynamics, we view it as a buying opportunity and remain bullish on Bitcoin and Bitcoin miners in 2024,” he wrote. .
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