CEOs of major Bitcoin mining companies remain optimistic ahead of the upcoming halving event, despite their performance lagging behind Bitcoin year-to-date, as per research and brokerage firm Bernstein.
This underperformance is attributed to robust inflows into U.S. spot Bitcoin exchange-traded funds (ETFs), which have drawn retail liquidity away from mining stocks, alongside concerns about the halving’s impact on miners’ revenue, according to Gautam Chhugani and Mahika Sapra in a client note on Monday.
Bernstein’s recent interviews reveal insights from Marathon CEO Fred Thiel, who views mining stocks as mere proxies for Bitcoin, noting that a popular trade involves longing spot Bitcoin ETFs while shorting miners, thus explaining the underperformance.
Zack Bradford, CEO of CleanSpark, anticipates that Bitcoin mining stocks will perform better post-halving, especially benefiting consolidated leaders compared to smaller, less efficient miners.
Bradford foresees industry consolidation resulting in four prominent public miners: CleanSpark, Marathon, Riot Platforms, and Cipher Mining. Thiel echoes this sentiment, citing CleanSpark as their primary competitor in the pursuit of acquisition targets.
Meanwhile, Chhugani and Sapra highlight Riot’s focus on organic expansion, suggesting that the market has penalized it for lower efficiency and uptime of its existing fleet. However, sentiment is expected to reverse once Riot brings a new 1 GW site online, doubling its capacity for the remainder of 2024. Marathon has recently acquired new Bitcoin mining sites, while CleanSpark aims to double its capacity by year-end.
As for the impact of the upcoming halving event, Bitcoin’s subsidy reward for miners will decrease by 50%, from 6.25 BTC to 3.125 BTC per block, while transaction fee rewards remain unchanged. Despite the traditionally challenging nature of halvings for miners, the substantial price increase of Bitcoin this year has resulted in near all-time high dollar revenues for miners, offering financial resilience pre-halving.
Additionally, strong economic activity on the blockchain has boosted transaction fee revenues, comprising up to 40% of total revenues at times, with AI demand further diversifying revenue streams. Although AI presents both opportunities and challenges, miners remain predominantly focused on Bitcoin mining.
Bitcoin’s recent price decline amidst geopolitical tensions may present attractive levels for sidelined investors, according to Bernstein. Nonetheless, with the halving event deemed a temporary headwind and miners poised for increased market share, robust revenues, and expansion opportunities, Bernstein anticipates 12 months of outperformance for leading public miners compared to Bitcoin.
