As the Bitcoin network approaches the next halving event, expected in just five days, the mood of the CEOs of the major public Bitcoin mining companies remains surprisingly optimistic, despite a year of underperformance compared to Bitcoin itself. This optimism is reported by analysts at Bernstein, who highlight the ongoing market share consolidation and new application opportunities that could redefine the mining landscape.
Summary
Market dynamics and implications of halving for industry leaders
Bernstein analysts Gautam Chhugani and Mahika Sapra note that the underperformance of mining stocks compared to Bitcoin can be attributed to strong flows of funds traded on Bitcoin spot exchange-traded funds (ETFs) in the United States, which have diverted retail liquidity from mining stocks. This shift has heightened concerns about the upcoming halving, which traditionally puts pressure on miners by halving their bitcoin rewards.
In recent interviews with Bernstein, Fred Thiel, CEO of Marathon, explained that mining stocks have been seen as simple proxies for Bitcoin. The launch of spot Bitcoin ETFs has popularized a new trading strategy: going long on Bitcoin ETFs and short on mining stocks. Meanwhile, Zack Bradford, CEO of CleanSpark, predicts a post-halving advantage for large and efficient miners like his company, suggesting that the sector will continue to consolidate around a few dominant players, including CleanSpark, Marathon, Riot Platforms, and Cipher Mining.
The sector is not only facing consolidation, but also significant expansions and technological advancements. Riot is focusing on organic growth, with the intention of launching a new 1 GW site online, doubling its capacity. Marathon and CleanSpark are also set to substantially increase their operational capacities by the end of the year.
A financial and technological perspective
The halving of Bitcoin, which occurs every 210,000 blocks or approximately every four years, reduces the bitcoin reward for mining a block by 50%. The upcoming halving will reduce the reward from 6.25 BTC to 3.125 BTC per block. However, the substantial increase in the price of Bitcoin this year (+60%) means that mining revenues in dollars are close to historic highs, providing a solid financial cushion. Furthermore, the increase in blockchain activity has increased transaction fee revenues, adding an additional level of financial security for miners.
Chhugani and Sapra also highlight a significant increase in transaction fees, which have sometimes accounted for up to 40% of revenues and currently represent about 10%. This flow of additional revenue will be crucial after the halving. Furthermore, the growing demand for artificial intelligence (AI) applications represents a double-edged sword for miners. On one hand, artificial intelligence helps reduce the costs of ASIC chips for Bitcoin, on the other hand it intensifies competition for acquisition sites, especially in states like Texas, where energy costs are low.
Economic perspectives and geopolitical impact and conclusions
Despite recent geopolitical tensions causing a temporary 8.7% drop in the price of Bitcoin to $66,016, Bernstein analysts suggest that current levels could attract waiting investors, assuming there are no further geopolitical disruptions. This could mark a period of relative stability and potential growth for Bitcoin and its mining sector.
In summary, although the halving event traditionally poses challenges, reducing Bitcoin miners’ rewards, the solid performance of the Bitcoin price and strategic changes in the industry keep the main mining sector CEOs optimistic.
With a stronger market share, an expanded capacity pipeline, and diversified revenue streams thanks to transaction fees and potential applications of artificial intelligence, Bernstein predicts that public Bitcoin miners are poised for 12 months of relative outperformance compared to Bitcoin. This period could redefine resilience and innovation in the Bitcoin mining sector, signaling a promising future despite immediate challenges.
