Skip to content

Bitcoin Mining's Pivotal Phase: Insights by JPMorgan

JPMorgan sheds light on the potential shift in the Bitcoin mining landscape.

Logos of JPMorgan and Bitcoin
Logos of JPMorgan and Bitcoin

Bitcoin ETF Approval: Catalyst for Change

The bitcoin mining industry is at a pivotal juncture. The potential approval of a spot BTC exchange-traded-fund (ETF) looms large, with the possibility of fueling a rally. This comes amidst record hash rates and the looming block reward halving, which may challenge the revenue streams and profitability of the sector, according to a recent report by JPMorgan.

Mining Operator Rankings by JPMorgan

JPMorgan's analysis emphasizes mining operators offering optimal relative value. This value is based on factors such as existing hash rate, operational efficiency, power contract terms, expansion plans, and liquidity. Analysts Reginald Smith and Charles Pearce lead this research.

Coverage and Rating Updates

JPMorgan has initiated coverage for several companies in the bitcoin mining industry:

  • CleanSpark (CLSK): Overweight rating with a target price of $5.50.
  • Marathon Digital (MARA): Underweight, priced at $5.
  • Riot Platforms (RIOT): Underweight, with a $6.50 target.
  • Cipher Mining (CIFR): Neutral rating.

Additionally, Iris Energy (IREN) saw an upgrade to overweight from a previous neutral stance.

SEC's Bitcoin ETF Decision and Market Expectations

The U.S. Securities and Exchange Commission (SEC) has postponed its decision on the approval of a spot bitcoin ETF to this month. The cryptocurrency community is optimistic that any nod of approval could lead to an influx of traditional investments into the domain.

Comparative Analysis of Mining Operators

  • CleanSpark stands out for JPMorgan, offering an appealing mix of scale, growth potential, power expenses, and relative value.
  • Marathon, despite being the most extensive mining operator, struggles with high energy costs and reduced margins.
  • Riot Platforms, while benefiting from low power expenses and liquidity, is deemed the priciest stock in the reviewed set.
  • Cipher Mining offers the most competitive power costs, but growth may be limited, as indicated in the report.

Impact of Block Reward Halving

JPMorgan's projections peg the four-year block reward opportunity at approximately $20 billion, given the current bitcoin prices. However, the upcoming block reward halving, anticipated in Q2 2024, might dent profitability. The bank believes nearly 20% of the network hash rate could be jeopardized post-halving as outdated mining computers are phased out.