JPMorgan Predicts 20% Drop in Bitcoin Network Hashrate After Halving
JPMorgan has forecasted a potential 20% decrease in the Bitcoin (BTC) Network Hashrate following the next halving event scheduled for April 2024. The report suggests that around 80 EH/s, equivalent to 20% of the network hashrate, could be removed as less-efficient hardware is decommissioned. The Bitcoin halving occurs every four years and involves a reduction in rewards for miners. The report also highlights that the four-year block reward opportunity amounts to approximately $20 billion based on Bitcoin’s current price. However, it notes a significant decrease of about 72% compared to two years ago.
JPMorgan Identifies Top Bitcoin Miners
JPMorgan’s report recommends mining operators that offer the best relative value considering factors such as existing hashrate, operational efficiency, power contracts, funded growth plans, and liquidity. The investment bank provides coverage with ratings and price targets for CleanSpark (CLSK), Marathon Digital (MARA), Riot Platforms (RIOT), Cipher Mining (CIFR), and Iris Energy (IREN). CleanSpark is JPMorgan’s top pick due to its balance of scale, growth potential, power costs, and relative value. Marathon is the largest mining operator but has high energy costs and low margins. Riot has low power costs and liquidity but is the most expensive stock in JPMorgan’s coverage universe. Cipher Mining has low power costs but limited growth potential.
Miners Seek Hedging Options Amid Price Volatility
Bitcoin miners are considering hedging options to protect their revenue stability amidst cryptocurrency market volatility. GSR, a leading firm in trading and market-making, offers hedging products to provide miners with a more predictable income. By offering these tools, GSR aims to make the $500 billion Bitcoin network more resilient, ensuring large operators are not at risk of going under during market downturns. Miners typically hold onto the Bitcoin they mine rather than selling it immediately, acting as a natural hedge betting on price increases over time. However, this strategy risks forgoing immediate profits.
Hot Take: JPMorgan Forecasts 20% Decrease in Bitcoin Network Hashrate Post-Halving
JPMorgan predicts that the next halving event in April 2024 could lead to a 20% drop in the Bitcoin Network Hashrate as less-efficient hardware is phased out. The report also highlights the significant decrease in block reward opportunity compared to previous years. JPMorgan recommends top Bitcoin miners based on various factors and identifies CleanSpark as its preferred pick. Additionally, GSR offers hedging options for miners to protect against market volatility. While miners often hold onto their mined Bitcoins for long-term gains, this strategy comes with the risk of missing out on immediate profits.
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