While most of the public cryptocurrency miners are positioned to survive the supply shock of the bitcoin halving, JPMorgan has named its top picks. “With the bitcoin halving on the horizon, we expect heightened volatility and trading volume in both bitcoin and mining stocks,” Reginald Smith, an analyst at JPMorgan, said in a note this week. “That said, we think recent weakness offers an attractive entry point, and are especially bullish on RIOT and IREN, which we think offer attractive relative valuations.” The bitcoin halving is estimated to take place in the next couple of days , and mining companies are preparing for reduced rewards revenue that will follow the event. Many of the publicly listed miners have been preparing for it by making big purchase orders for new mining equipment or increasing their electricity capacity and growing their hash rates. Nevertheless, uncertainty ahead of the halving has pressured mining stocks, most of which are down double digits for the year. Smith noted that Riot Platforms has been the worst-performing stock in JPMorgan’s mining coverage universe but noted that both Riot and CleanSpark are poised to show the most growth in their hash rates due to newly built and acquired facilities. JPMorgan has an overweight rating on Riot and Iris Energy , as well as a neutral rating on CleanSpark. Hash rates are a measure of the computational power used to process transactions on the bitcoin network. The larger a miner’s hash rate, the bigger revenue opportunity it has. Riot had a hash rate of 12.2 EH/s (or exahashes per second) in the fourth quarter and could exit the year with a rate of 28.4 EH/s, by JPMorgan’s estimates. Iris Energy started from 5.6 EH/s in the fourth quarter and is tracking for 16.4 EH/s by the end of this year. Smith also highlighted Riot’s low power costs, noting that electricity is the single-largest operating expense for the mining firms. “RIOT enjoyed the lowest power costs per coin mined in 2023 (~$7,500), owing to its attractive power purchasing agreement, while MARA had the highest power cost per coin mined (~ $17,400), due to third-party hosting fees,” he said. “Post-halving, we expect CLSK and RIOT to be the two lowest cost producers given their scale and attractive power contracts.” Although CleanSpark has a neutral rating from JPMorgan, Smith gave an honorable mention to the bitcoin mining company, calling it a “great halving play” based on its “relatively efficient fleet, low all-in mining costs, and favorable hashrate compares, which should drive record revenues and profits post-halving.” Unlike the other mining stocks, CleanSpark shares are up more than 50%. Even on Thursday, shares were rallying some 13% in trading. The halving occurs when incentives for bitcoin miners shrink to 3.125 newly created bitcoins — or about $20,000 at Thursday morning’s prices — from 6.25, as mandated by the code of the bitcoin blockchain. It’s scheduled to take place every 210,000 blocks, or roughly four years. —CNBC’s Michael Bloom contributed reporting.
