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This week, mining stocks saw losses amid a broader weakening of Bitcoin prices. Despite a multi-day correction phase that appears to be slowing, the widespread bullish sentiment towards digital assets remains intact.
One of the main concerns shaking the market is the expected Bitcoin halving event, scheduled for the end of April with a block height of 840,000. The halving is a predetermined event that halves the reward for mining new blocks, thereby slowing the rate at which new bitcoins are generated.
“…Many large mining farms know they will potentially face a difficult few months after the halving and are switching to fiat currency while prices are good, to prepare to move forward,” Nejc Kržan, director of NiceX, told Investing.com Exchange.
In a recent in-depth analysis by JPMorgan, the financial giant reviews the operational and financial trends of the bitcoin mining industry amid a cryptocurrency sell-off. The report evaluates the performance and strategic positioning of leading mining companies such as Cipher Mining Inc (NASDAQ:), clean spark (NASDAQ:), iris energy Ltd (NASDAQ 🙂, Marathon Digital (NASDAQ 🙂 and Riot Platforms (NASDAQ 🙂), projecting a hopeful outlook for the sector in 2024.
According to JPMorgan equity analysts, “the broader mining industry posted its highest quarterly gross profit since 2Q22” during the fourth quarter of 2023, indicating a strong recovery. The report further anticipates that “industry-wide gross profits will rise in 1Q24,” although it expects a slowdown in “2Q24 as the block reward halves,” indicating the cyclical nature of profitability. of the mining industry.
Marathon Digital notably stood out as the industry's top performer in 2023, with JPMorgan highlighting its Bitcoin production and capacity additions. “MARA was the big winner in 2023, adding the most capacity and mining the most bitcoins of any operator in our coverage universe,” the report states.
Looking ahead, the report identifies Riot Platforms and CleanSpark as key players poised for strong growth. “RIOT and CLSK are poised for further capacity growth in 2024, which we think bodes well for stock performance,” JPMorgan analysts predict.
Addressing operational efficiencies, the report reveals a competitive advantage for Cipher due to its low energy costs per coin mined at $9,900 in Q4 2023, in contrast to Marathon's higher costs. However, it praises Marathon's operating strategies, saying: “Marathon recorded the lowest cash SG&A cost per currency in 4Q23 ($4,800) driven by its scale and relatively efficient operations.”
The analysis also sheds light on the sector's financial activities, revealing that “the five miners in our coverage universe issued more than $2 billion in capital through ATM offerings in 2023,” a significant increase over the year. former.
The JPMorgan report concludes with an optimistic view of the resilience and adaptability of the mining industry. “We believe mining profitability will increase in 1Q24 before declining significantly in 2Q24 due to the halving,” he says.
