BTC halving’s impact on hash rates and miner stocks

On Friday evening, the Bitcoin network underwent its fourth “halving,” reducing miners’ rewards from 6.25 to 3.125 bitcoins.

This adjustment is expected to rationalize the network’s hash rate and industry spending, potentially benefiting crypto miners. Hash rates gauge the computational power used for Bitcoin transactions; higher hash rates mean greater revenue potential for miners.

Initial outcomes have surpassed expectations, with hash prices hitting around $0.08. This rate is advantageous for miners with a total hash cost of around $0.04 post-machine upgrade, allowing them to achieve close to 50% EBITDA margins.

Despite fluctuations in block-level data, including fee and hash price variations since Saturday’s peak, Compass Point maintains a positive outlook. They attribute this to rising Bitcoin transaction fees fueled by new features like Ordinals/Inscriptions and the Runes protocol launch on the Bitcoin network, seen as bullish for mining stocks.

Compass Point Research analysts stated, “We continue to favor miners trading at low valuations with the potential to double their hash rate this year with greater efficiency.”

The hash rate, inferred from implied block times and difficulty levels, has dipped below 600 EH/s, likely due to retiring older rigs like the s9, s17, and s19 pro series, which are inefficient above 6c power costs. However, a hash rate rebound is anticipated this year with the adoption of newer and more efficient mining machines like the S/T 21s and M60s series.

In the medium to long term, Compass Point predicts hash prices will stabilize above $0.045-0.05 post-halving, positively impacting the sector. They also suggest that BTC price growth could counterbalance the hash rate decrease, indicating this cycle may be constrained by power capacity rather than ASIC availability, unlike the previous cycle.

Among mining companies, Compass Point highlights those with promising outlooks due to low valuations and potential to double their hash rate this year with improved efficiency, such as Riot Platforms (NASDAQ: RIOT), Iris Energy, and Bitfarms.

Moreover, they favor miners like Core Scientific and TeraWulf, well-positioned with higher infrastructure investments and free cash flow.


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