Bernstein Reports: Bitcoin Mining – The Art of Survival, Consolidation, and the Potential of AI Diversification

Bernstein Reports highlights a resurgence in mining stocks this year, driven by growing optimism resulting from institutional ETF filings and the prospects of revenue diversification into the realms of high-performance computing and artificial intelligence (AI).

Bernstein Reports: Bitcoin Mining – The Art of Survival, Consolidation, and the Potential of AI Diversification

According to research Bernstein reports released by broker Bernstein, Bitcoin (BTC) mining stocks listed in the U.S. have experienced a remarkable surge this year, more than doubling in value after enduring significant losses during the crypto market downturn in 2022.

Bernstein reports identifies two key factors driving this resurgence. Firstly, the strong performance of Bitcoin prices, which has been buoyed by improving market sentiment following the filing of institutional exchange-traded fund (ETF) applications by major players like Blackrock and Fidelity. Secondly, some Bitcoin miners are seizing opportunities in high-performance computing and artificial intelligence (AI) as a means of diversifying their revenue streams.

The analysts at Bernstein describe Bitcoin mining as a unique game of survival, where miners with low costs and conservative debt profiles have the ability to withstand market downturns, consolidate their capacity and market share, and ultimately earn significant profits when Bitcoin prices surpass production costs.

Bernstein’s report emphasizes that miners burdened with high debt are unable to survive and often succumb during crypto market downturns, citing the recent bankruptcy of Core Scientific (CORZQ) as an example.

Bernstein suggests that the initial phase of consolidation in the mining industry has already taken place, and surviving miners are now focusing on expanding their capacity in preparation for the upcoming Bitcoin halving event. This event, expected to occur around April 2024, involves a 50% reduction in mining rewards and typically drives the price of Bitcoin higher.

In a similar vein, JPMorgan, a prominent Wall Street institution, recently stated in a Bernstein reports that the Bitcoin mining industry will gradually consolidate and become more competitive over time. The survival of miners will increasingly depend on their ability to maintain lower production costs.