Is It Time To Buy Bitcoin Mining Stocks?

The Bitcoin mining sector may present a promising investment opportunity despite the challenges posed by the recent Bitcoin halving, a recent 10x Research newsletter suggested.

What Happened: The report by 10x Research, authored by Markus Thielen, sees mining stocks on the verge of a significant upswing, thanks to the Bitcoin BTC/USD network showing resilience following the last halving event.

The halving, coupled with the launch of Runes—allowing users to mint tokens on the Bitcoin network—temporarily increased transaction fees, generating over $135 million in fees in the first week.

While this spiked the mining difficulty and reduced daily miners’ revenue from $70 million to $30 million, the industry is beginning to stabilize.

Thielen notes, "Bitcoin miners' revenue has marginally increased to $35 million, indicating a small distress signal to investors. However, listed miners have increased their holdings from 39,000 BTC in December to 48,000 BTC, creating a substantial revenue buffer of $700 million."

This strategic accumulation suggests that miners are better positioned than initially anticipated.

Historical patterns provide additional optimism.

"Bitcoin mining shares tended to decline or consolidate for approximately 50 days post-halving in 2020, before rallying," Thielen explains.

If this trend holds, mining shares could begin performing better by early June.

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Why It Matters: The report highlights a significant disparity between Bitcoin's performance and the share prices of mining companies.

For instance, buying Marathon Digital Holdings MARA at $20 is comparable to purchasing Bitcoin at $38,000, which could be highly advantageous if Bitcoin's price surges above $70,000 as projected due to declining U.S. inflation.

Despite the heightened difficulty of the Bitcoin network and near all-time high hash rates, Thielen asserts, "The network is doing much better than initially feared. Bitcoin miners might come out on top of this year's halving."

With Bitcoin mining shares down by an average of 20% year-to-date while Bitcoin has rallied by 60%, there is a potential for significant upside in mining stocks.

The report also highlights the increasing merger and acquisition activity in the sector.

Large players like Riot Platforms RIOT are building substantial reserves to acquire smaller competitors, which could benefit shareholders in these acquisition targets.

Thielen says, "Shareholders in acquisition targets tend to benefit when large players come to hunt. This might be the case here again."

What’s Next: Investors and industry professionals will have the chance to explore these insights further at the Benzinga Future of Digital Assets event on Nov. 19.

This event will provide a platform to discuss the evolving landscape of digital assets, including the potential of Bitcoin mining stocks in the current market environment.

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Image created using artificial intelligence with Midjourney.