US-listed Bitcoin (BTC) mining stocks have more than doubled this year after being devastated by the 2022 cryptocurrency crash. investment firm Bernstein pointed out in a July research report.
The strength and diversification of Bitcoin is a factor
According to the report, there are two main factors behind this recovery. First, bitcoin’s price volatility has strengthened as sentiment has improved due to exchange-traded fund (ETF) filings by institutional investors such as BlackRock and Fidelity. Second, some bitcoin miners are taking advantage of opportunities in the areas of high-performance computing and artificial intelligence (AI) as a “revenue diversification strategy.”
Consolidation of miners progresses
Analysts led by Gautam Chhugani wrote that “Best-in-class miners with low costs and conservative debt profiles will survive and consolidate their production capacity and market share so that the Bitcoin price exceeds the cost of production. It’s a unique survival game where you can make a huge profit when you play.”
Citing the recent bankruptcy of mining giant Core Scientific, Bernstein said that weak miners with heavy debt could not survive and “surrendered during the crypto winter.” ” he pointed out.
According to Bernstein, the first round of consolidation has already taken place and surviving miners are now adding production capacity in anticipation of Bitcoin’s halving (50% reduction in mining rewards). The next Bitcoin halving is likely to occur around April 2024, and halvings usually drive Bitcoin prices higher.
JPMorgan also said in a recent report that over time the bitcoin mining industry will consolidate and become more competitive as only miners with lower production costs will be able to survive.
｜Editing: Rinan Hayashi
｜Original: Bitcoin Mining Is a Game of Survival, Consolidation and Potential AI Diversification: Bernstein