Publicly-listed Bitcoin mining companies are facing a challenge to remain profitable as the upcoming halving event threatens to cut their revenue in half. While Bitcoin’s price predictions remain bullish, miners may need the cryptocurrency to reach six figures to sustain their current valuations.
Bitcoin Halving Impact on Miners
The Bitcoin halving, which occurs approximately every four years, is a significant event for miners as it reduces block rewards by 50%. This cut in revenue could pose serious headwinds for mining companies, including popular miners like Riot Platforms, Inc. (RIOT), despite their plans to expand mining capacity.
Bitcoin miners have had a banger of a year.
RIOT is up 457%
MARA is up 421%
BITF is up 337%
CLSK is up 246%
Both Bitcoin and Nvidia rose by less than public miners this year — 80% and 222% respectively.
The best way to get leveraged/high-beta exposure to BTC.
— Joe Consorti ⚡ (@JoeConsorti) July 18, 2023
Bitcoin mining stocks have seen an impressive surge this year, outperforming BTC itself. However, with potentially overbought conditions and increased BTC sent to exchanges, momentum might decline, making it essential for miners to rely on a higher Bitcoin price.
The Necessity of Six-Figure Bitcoin
According to a report by “Made Easy – Finance,” Bitcoin’s price may need to exceed $98,000 for miners like RIOT to justify their current valuations after the halving. Without a substantial increase in Bitcoin’s value, the mining sector may suffer.
Risks of Holding Mining Stocks
Given the uncertainty in underlying fundamentals and the potential for current valuations not factoring in the halving, “hodling” Bitcoin mining stocks is deemed extremely risky.
Various reports suggest optimistic forecasts for Bitcoin’s future price. Matrixport predicts a year-end target of $45,000 and an ambitious end-of-2024 target of $125,000, pointing to historical signals indicating the start of new bull markets.
Bitcoin may reach $120,000 by the end of 2024, Standard Chartered forecasts, as an expected improvement in crypto miners' fortunes allows them to hold on to more of the tokens https://t.co/Z9z0BbKCqS
— Bloomberg Crypto (@crypto) July 11, 2023
While Bitcoin’s price predictions are optimistic, publicly-listed Bitcoin mining companies may need the cryptocurrency’s value to exceed $98,000 by the halving to sustain profitability and justify their current valuations. As the market remains volatile, investors should consider potential risks when holding mining stocks.