Bitcoin Mining Is a Game of Survival, Consolidation and Potential AI Diversification: Bernstein

Mining stocks have been resurgent this year due to improving sentiment from institutional ETF filings and potential revenue diversification into high-performance computing and AI, the report said.

AccessTimeIconJul 7, 2023 at 7:52 a.m. UTC

Bitcoin (BTC) mining stocks listed in the U.S. have more than doubled this year after being decimated in the crypto carnage of 2022, broker Bernstein said in a research report Friday.

The resurgence has been driven by two main factors, the report said. First, strong bitcoin price action due to improving sentiment resulting from Blackrock, Fidelity and other institutional exchange-traded-fund (ETF) filings. Second, some bitcoin miners are tapping into opportunities in high-performance computing and artificial intelligence (AI) as a “revenue diversification strategy,” the note said.

  • Chandler Guo on Ethereum Mining: It’s ‘Hard Work’
    01:13
    Chandler Guo on Ethereum Mining: It’s ‘Hard Work’
  • Chandler Guo on China’s Crypto Mining Outlook
    01:27
    Chandler Guo on China’s Crypto Mining Outlook
  • Tough Time for Miners: NY Passes Moratorium; Riot Blockchain Sells More Bitcoin
    07:57
    Tough Time for Miners: NY Passes Moratorium; Riot Blockchain Sells More Bitcoin
  • NSC Director: Biden Administration Hasn’t Determined Holistic Policy Approach to Virtual Currency
    06:22
    NSC Director: Biden Administration Hasn’t Determined Holistic Policy Approach to Virtual Currency
  • “This is a unique game of survival where the best-in-class miners with low costs and conservative debt profiles can survive, consolidate capacity and market share, to earn hyper-normal profits when bitcoin prices exceed the cost of production,” analysts led by Gautam Chhugani wrote.

    Bernstein notes that weaker miners with high debt are not able to survive and “capitulate during crypto winters,” citing the recent bankruptcy of Core Scientific (CORZQ).

    The broker says the first round of consolidation has already played out and surviving miners are now adding capacity in anticipation of bitcoin halving, when mining rewards are cut by 50%, an event that typically drives the BTC price higher. The next bitcoin halving is likely to occur around April 2024.

    Wall Street giant JPMorgan also recently said in a report that over time the bitcoin mining industry will consolidate and become more competitive because only miners with lower production costs will be able to survive.

    Edited by Sheldon Reback.

    Disclosure

    Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

    Author placeholder image

    Will Canny is CoinDesk's finance reporter.