The analysis of a industry expert suggests that despite investor concerns over decreased profits following Bitcoin’s reward halving, the Bitcoin mining sector’s profitability remains robust. This viewpoint has led to a significant drop in Bitcoin mining shares, both in the US and abroad. However, these fears may not be justified.
According to Mitchell Askew, the chief analyst at Bitcoin mining company Blockware Solutions, investor worries were largely unwarranted. He identified profitability concerns following Bitcoin’s halving and a 7.5% price drop over the past week as the primary reasons for the decline in mining stocks.
“[The] halving will be a ‘buy the news’ event for public Bitcoin miners and the private ASIC market.”
According to Google Finance, the shares of Marathon Digital (MARA) and Riot Platforms (RIOT), two major Bitcoin miners, have experienced significant drops. Specifically, the prices have decreased approximately 53% for MARA and 54% for RIOT since their highest points in February this year.
On March 25, CleanSpark (CLSK) reached a peak price of $23.40 within the past three years. However, since then, its value has decreased by 38.1%, leaving it at $14.48 as of now. Despite this decline, the stock has experienced significant growth, with an increase of almost 250% in value throughout the year.
Bitcoin mining companies based outside of the United States, such as Bitdeer Technologies (BTDR) from Singapore and Iris Energy (IRIS) in Australia, which are listed on the Nasdaq, have experienced significant drops in value. Since reaching their highest points of the year on mid-February at $9.16 for Bitdeer and $8.30 for Iris Energy, their stocks have declined by 40.8% for Bitdeer and 47.6% for Iris Energy.
Bitcoins price drop coincides with the anticipated fourth bitcoin halving on April 20th. During this event, Bitcoin mining rewards are reduced by half to 3.125 BTC, equivalent to approximately $200,000.
In the year 2024, the concern about decreased profitability following Bitcoin’s halving was reflected in the Valkyrie Bitcoin Miners ETF (WGMI), an actively managed fund that follows the Bitcoin mining industry. Notably, this fund showed a “nearly zero” correlation with Bitcoin itself.
The cost of WGMI in relation to Bitcoin is getting close to a past minimal point in its local market, but Askew predicts a “bounce back” for mining stock prices soon after the halving event takes place.
In late January, Cantor Fitzgerald brought up concerns about profitability again when they stated that eleven publicly-traded Bitcoin mining companies would not be able to turn a profit if Bitcoin’s price stayed around $40,000 – the price it was then.
If the cost of Bitcoin doesn’t increase following the halving event, some American Bitcoin miners might need to relocate or broaden their operations overseas to take advantage of lower electricity expenses, as suggested by Jaran Mellerud, the founder and chief mining strategist of Hashlabs Mining.
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2024-04-17 06:47