The Bitcoin network underwent its fourth halving event, effectively reducing the rewards received by miners from 6.25 to 3.125 bitcoins.
This reduction in rewards is expected to bring about adjustments in the network’s hashrate and industry capital expenditures, potentially benefiting crypto miners. Hash rates, which gauge the computational power utilized to process transactions on the Bitcoin network, play a pivotal role in determining revenue opportunities for miners. A higher hash rate translates to greater revenue potential.
Initial observations following the halving have been more positive than anticipated, with hash prices hovering around $0.08, according to analysis from Compass Point Research. This price point is particularly advantageous for miners whose all-in hash costs stand at approximately $0.04 post-machine refresh, enabling them to achieve nearly 50% EBITDA margins.
Despite the inherent volatility in block-level data, including fluctuations in fees and hash prices from peak levels observed on Saturday, Compass Point maintains an optimistic outlook. The firm attributes its positive stance to the surge in Bitcoin transaction fees driven by the introduction of features like Ordinals/inscriptions and the launch of the Runes protocol on the Bitcoin network. These developments are viewed as bullish indicators for mining stocks.
“We continue to like miners trading at low valuations w/ ability to 2x there hash rate this year at much better efficiency levels,” remarked analysts from Compass Point Research.
The hash rate, as inferred from implied block times and difficulty levels, has corrected to below 600 EH/s. This adjustment is likely attributable to the planned retirement of older mining rigs such as the s9, s17, and s19 pro series, which become less cost-effective above 6c power costs. However, Compass Point anticipates a rebound in hash rates as newer and more efficient mining machines, such as the S/T 21s and M60s series, are deployed throughout the year.
Looking ahead, Compass Point expects hash prices to stabilize above the $0.045-0.05 range post-halving, potentially yielding positive effects for the sector. The firm also suggests that any growth in BTC prices could mitigate the decline in hash rate, suggesting that this cycle may be constrained by power capacity rather than ASIC availability, unlike the previous cycle.
Among mining companies, Compass Point highlights several with promising outlooks due to low valuations and the potential to double their hash rate this year at improved efficiency levels. These include Riot Platforms (NASDAQ: RIOT), Iris Energy, and Bitfarms.
Additionally, the firm expresses favor towards miners like Core Scientific and TeraWulf, who are well-positioned with higher infrastructure investments and free cash flow.
