Bitcoin miners’ main revenue stream is about to be slashed. Here’s what investors need to know

Published Wed, Apr 17 20243:01 PM EDTUpdated Thu, Apr 18 202411:14 AM EDT

The Bitcoin halving is set to take place in the next few days, which will cut miners' main stream of revenue in half. As scary as that sounds, the bigger, publicly traded miners are well-prepared to survive the halving and thrive, according to analysts, and given the recent weakness in mining stocks, investors may be staring at a big opportunity. "We believe a bitcoin price above $60,000-$65,000 means the halving is de-risked for nearly all public miners," Needham analyst John Todaro wrote in a note to clients on Tuesday. It currently costs miners between $36,000 and $52,700 to mine a single bitcoin, Todaro said. Meanwhile, even after bitcoin's plunge last weekend, the cryptocurrency is still trading above $61,000. "With bitcoin hovering around all-time highs, miners are seeing attractive margins," the analyst added. "In order for margins to materially compress, we would need either bitcoin prices to decline below $50,000 or hash rate to rise significantly 800 [to] EH+." The hash rate , measured in exahash and currently about 623, is used to measure the computational power being used to process network transactions. The higher the rate, the greater the expense for miners. Mining stocks have been sliding this year, with investors taking profits ahead of the halving after a meteoric rise last year. Marathon Digital , Riot Platforms , CleanSpark , Iris Energy and Cipher Mining have all fallen into the red amid bitcoin volatility after soaring some 300% to 600% in 2023. Miners offer amplified exposure to bitcoin's price action, which has been more volatile since the launch of bitcoin exchange-traded funds introduced more leverage to the market. Nevertheless, the price of bitcoin has more than doubled in the past year, climbing 110%, which has helped miners' efforts to invest in themselves ahead of the halving. "The large public miners are right now much better off than in prior cycles," said Mike Colonnese, an analyst at H.C. Wainwright. "They have much stronger cash balances, they're growing their bitcoin reserves, there's much more liquidity going into this halving. In addition, a lot of the bigger guys have been putting out these large purchase orders with Bitmain [and] MicroBT to really enhance their fleet efficiency to lower their operating costs." Colonnese's top picks to play the halving are CleanSpark and Iris Energy, citing high efficiency levels. According to JPMorgan, CleanSpark mined the biggest number of bitcoins per exahash in March. Todaro highlighted Riot, Cipher and Bitdeer, as he "prefers low-cost bitcoin producers." The halving takes place every 210,000 blocks mined, or about every four years. Typically, it kicks off a new cycle for bitcoin and sets the stage for a new bull run. This year, however, bitcoin is already well into the current cycle as it approaches the halving, and hit new all-time highs in March — something it has never before done ahead of the halving. "That's propelled bitcoin to a threshold where the miners are really generating healthy economics," said Colonnese. — CNBC's Michael Bloom contributed reporting.