Bitcoin miners have faced a challenging start to 2023, enduring a tumultuous market downturn in the previous year. However, as prices have rebounded in recent months, large miners are now operating at significant capacity, according to a report by Bernstein.
The report highlights that the 16 largest publicly listed mining firms collectively contributed to 16% of the overall mined BTC. These companies have a combined mining capacity of 72 exahashes per second (EH/s) and are projected to increase their capacity by 182% over the next 2-3 years.
Bernstein analyst Gautam Chhugani suggests that miners with lower production costs and less debt are expected to be the primary beneficiaries of this expansion. These miners are better positioned to handle high volatility and cost surges resulting from the upcoming Bitcoin halving, scheduled for April 2024.
Currently, with Bitcoin hovering around $29,000, Bernstein estimates that 15 of the mentioned Bitcoin miners have production costs below $15,000 per BTC. However, the upcoming halving is expected to double the cost of production, potentially pushing some miners to break even unless there is a price increase.
On a positive note, the approval of a Bitcoin exchange-traded fund (ETF) could provide relief for miners. Bernstein’s report suggests that if the United States Securities and Exchange Commission (SEC) deviates from its strict stance and approves a Bitcoin ETF, it could lead to increased institutional participation and positive momentum in the market. This would give miners more margin room for the 2024 halving event, as lower production costs would enhance their positioning.
It’s worth noting that three of the mentioned miners have a debt-to-equity ratio of over 1, which limits their ability to withstand depressed Bitcoin prices. On the other hand, four prominent Bitcoin mining companies, namely Riot (RIOT), Marathon Digital (MARA), Hut 8 (HUT), and Hive Digital (HIVE), hold onto the cryptocurrency in their financial portfolios. This strategic decision allows them to wait for more favorable prices before selling, ultimately maximizing their realized profits from the BTC they have mined.
Overall, Bernstein’s report provides insights into the current state of Bitcoin mining and the potential impact of the upcoming halving. While miners face challenges, those with lower production costs and less debt are well-positioned to benefit from the industry’s growth. The approval of a Bitcoin ETF could further support miners and provide them with increased margin room for future events.