Investing in Bitcoin Miners: The Best Equity Proxy to Bitcoin as it Heads Toward $150,000
According to analysts at research and brokerage firm Bernstein, investing in bitcoin miners is the best way to gain exposure to the largest cryptocurrency by market cap as it heads toward $150,000. The analysts argue that investors should not simply look at the daily correlation of bitcoin miners when the cryptocurrency is rallying, but should take a through-cycle view. They note that miners almost always outperform bitcoin during bull markets and underperform during bear markets. Additionally, they highlight that bitcoin miner stocks are retail-dominated and institutions have largely avoided bitcoin proxies.
Riot Platforms and CleanSpark: The Biggest Beneficiaries
The analysts at Bernstein specifically mention Riot Platforms and CleanSpark as stocks that could benefit the most from investing in bitcoin miners. They suggest that even if production costs were to double after the halving event, both Riot and CleanSpark would generate high gross profit margins of around 70% and 60%, respectively. They also anticipate that any reduction of miner capacity post-halving would lead these companies to gain relative market share.
The Halving Event
Bitcoin halvings occur automatically every four years, with the next event expected in April. During a halving, the reward subsidy for miners on the network is reduced. In this case, it will drop from 6.25 BTC to 3.125 BTC per block. However, miners continue to earn additional transaction fees for each block mined.
Increased Revenue from Bitcoin Fees
The analysts expect that as activity in the Bitcoin ecosystem grows with the development of additional Layer 2/sidechain solutions, DeFi, and NFTs, the current 5% of miner revenue generated from Bitcoin fees will rise to a sustainable 15%.
More Convincing Bitcoin Price Target of $150,000
The analysts at Bernstein are now “more convinced” about their $150,000 bitcoin price target. They have incorporated institutional flows into their estimates and initially expected $10 billion of inflows this year following the launch of spot bitcoin ETFs in the U.S. on January 11. They also projected an additional $6 billion in 2025. However, net inflows have already surpassed $9.5 billion, with a daily average of approximately $370 million. If this trend continues, the spot bitcoin ETFs will exceed Bernstein’s 2025 estimates within 166 trading days.
The analysts believe that leading ETF issuers have not fully integrated bitcoin into traditional asset portfolios and there is still significant potential for further integration with IRAs, private banks, wirehouses, and other pools of capital such as sovereigns and pensions.
Hot Take: Bitcoin Miners as an Equity Proxy
The analysts at Bernstein argue that investing in bitcoin miners is the best way to gain exposure to bitcoin as it continues to climb toward $150,000. They emphasize the importance of taking a through-cycle view rather than simply looking at the daily correlation during rallies. The analysts suggest that Riot Platforms and CleanSpark are stocks that could benefit the most from investing in bitcoin miners. They also anticipate increased revenue from Bitcoin fees as activity in the ecosystem grows. Finally, they express confidence in their $150,000 bitcoin price target and highlight the potential for further institutional integration into traditional asset portfolios.
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