Bitcoin mining companies are showing signs of recovery following the recent approval of spot bitcoin exchange-traded funds (ETFs) in the United States. In a research report released on Thursday, Bernstein suggests purchasing its preferred stocks in the sector before the upcoming reward halving event.
According to the report, the world’s largest cryptocurrency, Bitcoin (BTC), has demonstrated strong performance leading up to the halving, where the rewards for miners are reduced by 50%. This trend is expected to continue throughout the year, potentially reaching new highs. The halving is anticipated to occur in April, and historical data indicates that Bitcoin prices have surged after each of the three previous halving events.
Bernstein advises investors to gain exposure to Bitcoin by investing in mining stocks, with Riot Platforms (RIOT) and CleanSpark (CLSK) being the broker’s top recommendations in the sector. The report highlights the positive momentum in ETF flows, providing an additional boost for Bitcoin.
“Given the positive momentum in ETF flows, resilient BTC price action, and healthy miners increasing capacity ahead of the halving, we recommend investors enter here for our preferred names,” wrote analysts Gautam Chhugani and Mahika Sapra. “The institutional narrative driven by bitcoin ETFs is fostering demand, and with Bitcoin being a reflexive asset, we anticipate that higher prices will attract more ETF inflows, leading to new highs in 2024.“
While the halving is typically considered a “risk-off” event for the sector, as it clears out high-cost miners, the report acknowledges that the current market conditions look favorable. The broker anticipates a 15% reduction in the bitcoin hash rate after the halving, but suggests that if prices remain robust, the decline could be less severe.
“At a $44,500 bitcoin price, most of the U.S. listed miners appear relatively well positioned, even if their costs double post halving,” the report noted. Additionally, positive ETF flows are contributing to the overall bullish market sentiment, creating a feedback loop where higher prices lead to increased inflows.
