JPMorgan bullish on bitcoin mining as SEC approves approved ETF

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JPMorgan bullish on bitcoin mining as SEC approves approved ETF

The bitcoin mining industry is in a crucible moment, as the approved BTC ETF could catalyze a rally against record hashrates and the impending block reward halving that threaten the industry's revenues and profitability, JPMorgan said in a research report Wednesday.

The bank favors mining operations that offer the best relative value in light of their 'existing hashrate, operational efficiency, power contracts, funded growth plans and liquidity,' said analysts Reginald Smith and Charles Pearce.

JPMorgan initiates coverage of CleanSpark with an overweight rating and a price target of $5.50, Marathon Digital with a $5 target, Riot Platforms with a $6.50 target, and Cipher Mining neutral. Iris Energy, which is overweight, has also been upgraded from neutral to overweight.

The SEC has delayed its decision on whether or not to approve a spot bitcoin ETF until late this month. The crypto sector is hopeful that a surge of mainstream money will occur if it receives any regulatory approval.

Marathon is the biggest mining company, but it has the highest energy costs and lowest margins, the analysts said. Riot's coverage is dominated by a relatively low power cost and liquidity but is the most expensive stock in their coverage area.

The bank estimates the potential for a four-year block reward of around $20 billion at current bitcoin prices. The looming block reward halving in the second quarter of 2024, expected in the second quarter of 2024, could impact profitability. It estimates that at least 20 percent of the network hashrate is at risk from halving as less efficient mining computers are decommissioned.