Bitcoin
Cantor Fitzgerald Is Bullish on Bitcoin Mining Sector and Initiates 7 Stocks to Buy By Investing.com
Crypto miners are facing uncertain times as the recent halving event has altered the country’s economic dynamics. However, analysts at Cantor Fitzgerald believe optimism remains high for the Bitcoin mining sector.
Bitcoin prices have remained high, and with a global network hash rate of approximately 600 EH/s, all publicly traded Bitcoin miners can mine Bitcoin profitably. As such, Bitcoin miners offer an attractive, leveraged approach to investing in Bitcoin, allowing them to essentially mine Bitcoin at a discount to spot prices.
According to Cantor Fitzgerald, growth is the main focus of Bitcoin miners, with growth investment equaling maintenance investment. As new platforms are deployed, they not only increase hash rate capacity but also improve efficiency, reducing the cost of Bitcoin mining.
Cantor has initiated research coverage on 7 new stocks, all with “Overweight” rates.
Some companies like Cleanspark (NASDAQ:), Marathon Digital (NASDAQ:) and Riot Platforms (NASDAQ:) have positioned themselves as large-scale miners. These companies have gained a competitive advantage thanks to increased commercial activity, ample financial liquidity and a strong financial position to capitalize on acquisition opportunities.
“We believe CLSK offers the best growth story, RIOT offers the best growth/valuation mix, the best way to leverage energy expertise, and the best way to play the AI/HPC theme,” analysts said in a note.
Investors who are disappointed with the recent underperformance of mining stocks compared to the price of Bitcoin may ignore that this correlation is sustainable, but often behaves like a coiled spring.
Cantor Fitzgerald predicts hash rate capacity among the seven miners they cover will increase from 59.7 EH/s in April 2024 to 230.5 EH/s by the end of 2025.
Stable energy costs will also reduce the cost of Bitcoin mining, assuming the network hash remains stable. However, the report is optimistic about the price of Bitcoin and expects the network’s hash rate to increase to 900 EH/s by the end of 2025.
Cantor Fitzgerald believes that the share of total hash controlled by publicly traded Bitcoin miners will increase over time. Currently, publicly traded miners control around 20-25% of the network’s total hashrate. With Bitcoin’s halving, the cost of mining has doubled, and although the new rigs are more efficient, the fringe operator will face challenges, especially with another halving expected in 2028.
Cantor Fitzgerald favors miners with low cost, scale and liquidity. A flexible balance sheet allows mining companies to be aggressive with growth, whether organic or inorganic. That said, miners who do not have these advantages will have difficulty growing and keeping pace with their peers, leading to a decline in market share.
With the AI boom, the demand for high-power computing (HPC) has increased, providing Bitcoin miners with the option to use excess power capacity to support AI/HPC needs. Some miners are actively exploring this opportunity, such as Core Scientific Inc’s (NASDAQ:) recent deal with CoreWeave.
Cantor Fitzgerald believes the net present value (NPV) of this deal, based on $1.5 million of construction investment per MW, is $12 million per MW. Among its coverage, WULF and Iris Energy Ltd (NASDAQ:) are best positioned to benefit from this trend due to their secure energy capabilities and early involvement in AI/HPC.
Meanwhile, Riot Platforms has one of the lowest mining costs and best balance sheet in the industry. The report further notes that Cipher Mining has the lowest energy cost among its peers, while Cleanspark is poised to secure the highest hash rate by the end of 2024.