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Bernstein argues bitcoin's 'flattish' price action is great for public miners

Bernstein argues bitcoin's 'flattish' price action is great for public miners

The BlockThe Block2024/05/13 10:43
By:James Hunt

Analysts at Bernstein suggested that bitcoin’s “flattish” price action can be good for miners — when economics are driven by competitive hash-rate wars.The analysts said they don’t anticipate any significant drawdown here and expect the bitcoin price to remain range-bound before breaking out to the upside.

Analysts at research and brokerage firm Bernstein aren’t worried about the “flattish” price action of bitcoin, arguing that it can be great for miners — when economics are driven by competitive hash-rate wars.

“Bitcoin BTC +2.28% price action has been flattish, but we don't fear any major drawdown here,” Gautam Chhugani and Mahika Sapra wrote in a note to clients on Monday. “We expect Bitcoin to remain range bound (high 50Ks to low 60Ks) and break out on the upside to continue its upward adoption trajectory, as Bitcoin ETFs see allocation from RIAs, wealth platforms and other institutional funds.”

Bitcoin is currently trading for around $62,800, according to The Block's price page .

Bitcoin mining hash rate drops post-halving

On Thursday, Bitcoin mining difficulty dropped 5.7% — marking the largest negative adjustment since the bear market lows, when difficulty fell 7% on Dec. 6, 2022 and bitcoin was trading for around $17,000.

Bitcoin mining difficulty is a relative measure of how hard it is to mine a new block compared to the easiest it can ever be. It adjusts automatically every 2016 blocks — roughly two weeks — to ensure that, on average, a new block is found every 10 minutes, regardless of how many miners are actively mining.

For example, when there’s an increase in the number of miners, the difficulty of mining bitcoin rises. Conversely, if there is a decrease in the number of miners competing to find new blocks, the protocol lowers the mining difficulty, making it easier for the remaining miners to discover blocks.

Bitcoin difficulty. Image: Bernstein .

The negative difficulty adjustment followed a 10% drop in network hash rate since the last difficulty adjustment on April 24, from a seven-day moving average of 639.58 EH/s to 577.09 EH/s as of yesterday, according to The Block’s data dashboard . Prior to the adjustment, average block times were running at 10 minutes and 36 seconds.

 

“With weaker price support and almost doubling of costs post halving, higher cost mining equipment shut down resulting in a decline in hash rates,” the analysts noted.

Bitcoin hash rate. Image: Bernstein .

What's the impact on public Bitcoin miners?

Despite the overall decrease in the Bitcoin network’s total hash rate following its fourth halving event, the market share of publicly-listed miners Marathon Digital, Riot and CleanSpark has increased slightly by 0.2%, according to Chhugani and Sapra.

The analysts expect these miners to further consolidate their market share via an organic and merger and acquisition-led expansion, given their strong bitcoin balance sheets and cash positions. 

Market share of bitcoin miners. Image: Bernstein .

CleanSpark recently acquired three mining sites in Mississippi for around $20 million and agreed to purchase another two sites in Wyoming for approximately $19 million, the analysts noted. Marathon also recently acquired new sites at a cost of around $265 million. Meanwhile, Riot is working on tripling its capacity via an expansion at its Corsicana site in Texas, they added.

“Overall, a temporary pause in bitcoin’s price is actually good for the incumbent lower cost Bitcoin miners, as hash rates remain capped and strong miners can execute on their aggressive capex and MA plans to grow market share,” Chhugani and Sapra wrote. “Otherwise, it becomes a treadmill for the miners, where they keep spending capex, to stay at the same market share. When bitcoin price momentum picks up, miners can harvest high dollar revenues over higher production.”

Last week, the Bernstein analysts doubled down on their $150,000 bitcoin price prediction this cycle, citing a variety of factors.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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