The mining industry is well positioned to capitalize on the upcoming bitcoin cycle, according to a recent report by Bernstein. The brokerage firm cited several factors that could contribute to the industry’s growth, including the cryptocurrency’s safe haven status, the upcoming reward halving, and lower energy and equipment costs.
Bitcoin’s safe haven status has become increasingly evident in recent years, as more investors turn to the cryptocurrency as a hedge against inflation and economic instability. As a result, bitcoin prices have risen steadily, with the largest cryptocurrency by market cap climbing 70% in the first few months of 2023.
Meanwhile, energy and equipment costs for bitcoin miners have been on the decline, which should help to improve their cash generation and leverage positions. According to the report, this could lead to higher gross margins for miners in 2023.
Looking ahead, Bernstein expects miners to benefit from the upcoming reward halving, which is set to take place in early 2024. This process, which occurs roughly every four years, cuts the total number of bitcoin that miners can earn by 50%.
The halving makes bitcoin more scarce by reducing supply, which can drive up prices and attract more miners to the network. This, in turn, increases the hashrate and the overall security of the network.
If the 2024 halving follows the same pattern as earlier ones, the mining industry could see “lower competitive intensity” due to the sector’s downturn in 2022, as well as higher bitcoin prices, which could lead to improved profitability before additional mining capacity comes online.