Bitcoin Miners with Low Cost of Production and Low Debt Set to Benefit from Increased Capacity, Says Report

Bitcoin Miners Adding Capacity: Who Will Benefit?

According to a research report by broker Bernstein, Bitcoin miners are increasing their mining capacity, with the 16 largest publicly listed mining companies accounting for 16% of total BTC mined. These companies currently have a combined mining capacity of 72 exahashes per second (EH/s) and are planning to increase that by 182% in the next 2-3 years. The report highlights that larger miners with a low cost of production and low debt are likely to be the big beneficiaries of this increased capacity.

Key Points:

The 16 largest Bitcoin mining companies represent 16% of total BTC mined.
Combined mining capacity is currently 72 EH/s.
Companies plan to increase capacity by 182% in the next 2-3 years.
Miners with low cost of production and low debt will benefit the most.
15 of the companies have production costs below $15,000 per BTC.

The report emphasizes that miners with a low cost of production and low debt will have a greater capacity to withstand any bitcoin price volatility and cost spike from the upcoming bitcoin halving in Q1 2024. Currently, the bitcoin price is around $30,000, and doubling the cost of production during the halving could push some miners to break-even, assuming no price increase. However, if there is positive momentum from bitcoin ETF approvals and increased institutional participation, miners with lower production costs will be better positioned for the impact of the 2024 halving.

Furthermore, the report notes that three miners have a debt-to-equity ratio of more than 1, which reduces their ability to withstand depressed bitcoin prices. On the other hand, four companies—Riot, Marathon Digital, Hut 8, and Hive Digital—hold bitcoin on their balance sheets, allowing them to wait for higher prices before selling and make greater realized gains.

Hot Take:

Larger Bitcoin miners with a low cost of production and low debt are poised to benefit the most from increased mining capacity. Their ability to withstand price volatility and the upcoming bitcoin halving will give them a competitive advantage. However, miners should also be prepared for potential market changes, such as ETF approvals and institutional participation, which could create margin room and improve their positioning for the 2024 halving.