Bernstein believes that only the big players can survive as mining costs continue to rise.
On Friday, July 7, the private wealth management giant Bernstein published a report stating that bitcoin mining companies have been on the upswing this year after facing a harsh crypto winter last year in 2022.
Along with the rise in the price of bitcoin, the stock price of listed bitcoin mining companies has also doubled this year. Bernstein notes that the strong recovery in the cryptocurrency market along with institutional participation has played a crucial role in boosting the Bitcoin mining industry.
The report also notes that some bitcoin miners are taking advantage of new opportunities in high-performance computing combined with artificial intelligence (AI) as part of their “revenue diversification strategy”. Bernstein Analysts are led by Gautam Chogani books:
“This is a unique game of survival where best-in-class miners with low costs and conservative debt profiles can survive, boost capacity and market share, to earn very normal profits when bitcoin prices exceed production costs.”
The big miners will survive
Bernstein also noted that the cryptocurrency mining industry will largely consolidate in favor of the big players. This is because cryptocurrency mining is becoming more capital intensive which makes it harder for smaller players to survive.
Bernstein notes that mining companies are too indebted to survive and often succumb to market downturns, as evidenced by the recent bankruptcy of Core Scientific (CORZQ).
According to the broker, the initial phase of consolidation in the mining industry has already taken place, and the remaining miners are now expanding their capabilities in preparation for the upcoming Bitcoin halving. This event, which occurs approximately every four years and reduces mining rewards, often increases the price of Bitcoin. The next halving is expected to be in April 2024.
In a similar vein, JPMorgan, a prominent Wall Street firm, stated in a recent report that the bitcoin mining industry will gradually consolidate and become more competitive. Only miners with low production costs will be able to sustain their operations in the long run.
Big mining players are already taking bold action. Crypto mining giant Hut 8 recently secured a $50 million line of credit from Coinbase to expand its operations.
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Bhushan is a financial technology enthusiast with a good knack for understanding financial markets. His interest in economics and finance has turned his attention towards the new emerging Blockchain technology and Cryptocurrency markets. He is persistent in the learning process and keeps himself motivated by sharing the knowledge gained. In his spare time he reads fantasy and thriller novels and occasionally explores his culinary skills.