As the Bitcoin halving approaches, the cryptocurrency market is facing heightened volatility and increased trading volume. JPMorgan’s top picks for cryptocurrency mining stocks are RIOT and IREN, which are seen as having attractive relative valuations. With the halving estimated to occur in the next couple of days, mining companies are bracing themselves for a reduction in rewards revenue. Despite the uncertainty surrounding the halving, many publicly listed miners have been proactive in preparing for the event by upgrading their equipment and expanding their hash rates.
Riot Platforms has been identified as the worst performing stock in JPMorgan’s mining coverage universe. However, analysts expect the company, along with CleanSpark, to demonstrate the most growth in hash rates due to their investments in new facilities. JPMorgan has given Riot an overweight rating, highlighting its potential for significant expansion. CleanSpark, on the other hand, has been deemed a “great halving play” due to its efficient fleet, low mining costs, and favorable hash rate comparisons. Despite receiving a neutral rating, CleanSpark’s shares have surged by more than 50%, indicating investor confidence in the company’s future prospects.
Hash rates play a crucial role in determining a miner’s revenue potential. The higher the hash rate, the greater the opportunity for generating income. During the fourth quarter, Riot had a hash rate of 12.2 EH/s and is projected to reach 28.4 EH/s by the end of the year. Similarly, Iris Energy started with a hash rate of 5.6 EH/s and is on track to achieve 16.4 EH/s by the end of the year. JPMorgan’s analysis also pointed towards Riot’s low power costs, which significantly impact a mining firm’s profitability. Comparatively, companies like MARA face higher power costs due to third-party hosting fees. Post-halving, JPMorgan anticipates that CLSK and RIOT will be among the most cost-effective producers given their operational scale and favorable power contracts.
The Bitcoin halving signifies a reduction in incentives for miners, with the reward shrinking from 6.25 to 3.125 newly created bitcoins every 210,000 blocks. This adjustment, mandated by the bitcoin blockchain’s code, is scheduled to take place roughly every four years. The impending halving has put pressure on mining stocks, resulting in double-digit declines for many companies. Nonetheless, JPMorgan remains bullish on the long-term potential of Riot and Iris Energy, highlighting their growth prospects in the post-halving landscape. As the cryptocurrency market continues to evolve, investors are closely monitoring the performance of mining stocks and adjusting their positions accordingly.