Bitcoin Mining Stocks Surging Ahead of Produced BTC, Reports JPMorgan
Bitcoin miners traded on the stock market are seeing unusually high valuations compared to the amount of Bitcoin they have yet to mine, as per a report from JP Morgan. The report analyzed the performance of 14 major Bitcoin mining companies in terms of their hash rate and Bitcoin production, as well as their overall dominance in the mining sector.
According to JP Morgan analyst Reginald L. Smith, the combined market capitalization of these 14 U.S.-listed Bitcoin miners surged by 29% ($6.4 billion) from June 30th to $28.3 billion by July 15th. Among these companies, Cipher Mining (CIFR) showed the best performance with a 44% increase, while Stronghold Digital (SDIG) was the worst performer, experiencing an 8% decline. Interestingly, all miners, except for Stronghold Digital, outperformed Bitcoin over the same period, with Bitcoin itself rising by 6%.
Since Bitcoin miners earn revenue in BTC, their earnings and stock performance are closely linked to the digital currency. Factors like energy efficiency, competition from other miners, and the Bitcoin halving event, which reduces the rate of new BTC production, can also impact their operations.
Despite the recent halving event, Bitcoin’s total hash rate remains down by about 60 exahashes per second (EH/s). The hash rate is a key indicator of industry competition and mining difficulty, with a decline suggesting that some miners have exited the market. However, public miners seem to be thriving, with JP Morgan noting that they collectively added a record 17 EH/s of capacity in June, reaching a total hash rate of 157 EH/s, representing about 26.6% of the global network hash rate.
Despite their strong position in the market, JP Morgan highlights that the projected future BTC earnings of these large miners appear significantly lower compared to their current market valuations. The report points out that the aggregate market cap of these miners is now 131% of the nominal value of all remaining Bitcoin, a sharp increase from the average ratio of 78% seen since January 2022.
Furthermore, the report mentions that Bitcoin’s “hashprice,” a measure of overall mining profitability, has dropped over 50% from pre-halving levels. Hive Digital (HIVE) and Bitfarms (BITF) were the top performers in terms of BTC mined per unit hash rate deployed in June.
In conclusion, while Bitcoin miners are currently experiencing high valuations on the stock market, their future BTC earnings may not align with these levels, as per JP Morgan’s analysis.
