Bitcoin Mining Stocks Brace for Impact Ahead of Halving Event

The TDR Three Takeaways for Bitcoin Mining Stocks and the effect of Halving:

1. Bitcoin mining stocks face volatility as the halving event nears, potentially halving revenues.
2. Market sentiment is bearish, but technological advances and strategic planning of coin holdings have CEOs expressing confidence.
3. The role of Bitcoin ETFs and wild prediction of analysts and influences may influence future stock prices.

Bitcoin mining stocks are currently experiencing a downturn as the market anticipates tomorrow’s halving event. This has sparked speculation about its impact on both Bitcoin and Bitcoin mining stocks. We will share two extreme predictions at the end of this article. The decline in Bitcoin mining stocks is highlighted by companies such as Marathon Digital Holdings, Riot Platforms, and CleanSpark. Over the past month, Marathon Digital Holdings has seen a nearly 25% drop in stock value, while Riot Platforms has experienced a loss of almost 30%. This downturn occurs amid increasing short interest, with collective short interest in stocks from 15 Bitcoin mining companies nearing the $2 billion mark, suggesting a bearish sentiment from investors.

Despite this decline, Bitcoin mining stocks continue to draw attention due to the sector’s advancements in mining technology. CEOs of these companies are optimistic, citing cost-efficient operations and advanced technology as factors that could offset the potential revenue losses from the halving, estimated at up to $10 billion annually.

The current Bitcoin halving differs from previous instances, primarily because of the increased involvement of large financial institutions and the emergence of Bitcoin ETFs. These developments introduce more complexity and potential volatility. This optimism is supported by the approvals of Bitcoin ETFs in regions like Hong Kong, potentially boosting demand and supporting higher Bitcoin prices.

In preparation for the halving, Bitcoin miners have adjusted their strategies. Data from CoinMetrics shows that miners have reduced their Bitcoin holdings to the lowest level since early 2021, diverging from previous accumulation patterns. This shift, driven by the need to adapt operations and upgrade equipment in response to reduced mining rewards, has led miners to sell more of their reserves to manage operational expenses.

As the halving event approaches, there is a tense atmosphere with short sellers targeting Bitcoin mining stocks, betting against the sector’s stability. This strategy is not only influenced by the upcoming halving but also by broader economic factors, including geopolitical tensions that push investors towards safer assets. Despite these challenges, the sector is witnessing significant investments in new mining machines and facility expansions, showing a commitment to growth and adaptation.

Who is going to win? Here are two predictions you can consider. Venture capitalist Tom Draper predicted a $250,000 Bitcoin price by the end of 2024, citing the halving and further Bitcoin ETF approvals as key drivers. He also made another bold prediction that “I hope anybody who’s watching this is trying to at least have some bitcoin so that they can feed their family during the time when the dollar goes to zero.” 

Alternatively, Dan Dolev, an analyst at Mizuho Securities, cautioned investors against buying into Bitcoin’s latest surge, with the price of the crypto token soaring 48% to record highs since the start of the year. He warned that interest in crypto is about to fade, which could cause the price to tank to as low as $30,000, a 54% loss from levels on Monday around $64,750. Dolev added that the price of Bitcoin could eventually plunge as low as $20,000 in the next “ice age” for crypto, marking a 69% drop from current levels.

Besides influences from wild predictions, Bitcoin mining stocks are facing pressures from the imminent halving, increased short selling compared to technological advancements and strategic investments in growth. We will watch and see how it turns out. Want to keep up to date with all of TDR’s research and news, subscribe to our daily Baked In newsletter.