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⚡Bitcoin Mining Worth $74B, Says JPMorgan🏦

Croxroad

26 Aug 2024 — 4 min read

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⛏️ JPMorgan

In a recent research report, JPMorgan revised its price targets for several Bitcoin mining stocks, including CleanSpark (CLSK), Iren (IREN), Marathon Digital (MARA), and Riot Platforms (RIOT), reflecting second-quarter results and shifts in Bitcoin’s price and network hashrate. The bank lowered its price target for CleanSpark to $10.50 from $12.50 and maintained a neutral rating. For Iren, the target was reduced to $9.50 from $11, but JPMorgan kept its overweight rating. Marathon Digital saw its target cut to $12 from $14, while Riot Platforms’ target was trimmed to $9.50 from $12. Despite these adjustments, JPMorgan identifies recent underperformance in Iren and Riot Platforms as potential buying opportunities.

JPMorgan estimates the notional value of the remaining 1.3 million Bitcoins to be mined at approximately $74 billion at current Bitcoin prices. The bank’s report highlights a significant 19% decrease in the four-year block reward revenue opportunity since early June, though it remains up 85% year-on-year. The decrease is attributed to changes in Bitcoin’s price and network hashrate, which affect mining profitability. Despite operational challenges faced by Riot Platforms and recent cost increases for Iren, JPMorgan sees potential for improvement. Riot's operational issues are expected to be resolved, potentially boosting its stock performance, while Iren’s recent power cost issues are considered correctable.

JPMorgan’s preference for Iren and Riot Platforms is based on their current undervaluation and expected future performance improvements. The bank believes that recent setbacks in these stocks present attractive entry points for investors. As the Bitcoin mining industry navigates these challenges, JPMorgan's insights suggest that the market for mining stocks remains dynamic, with select companies offering promising opportunities for growth.

🪺 Bitcoin Fees Jump 10x

Bitcoin transaction fees have surged to their highest level since June following the mainnet launch of Babylon, a Cosmos-based Bitcoin staking protocol. Launched on August 22, Babylon allowed users to deposit Bitcoin for staking to support Proof of Stake (PoS) networks. The initial cap of 1,000 BTC, worth approximately $61 million, was reached in less than three and a half hours, highlighting strong demand for Bitcoin staking services. Babylon's introduction marks a new use case for Bitcoin, expanding beyond its traditional roles of value storage and payments to include staking for network security and rewards.

The heightened interest in Babylon's staking service led to a dramatic increase in Bitcoin transaction fees, which surged more than tenfold to $7.68 from $0.74 the previous day, according to Ycharts. The transaction limit of 0.05 BTC per user was implemented to ensure widespread participation, contributing to the rise in fees and transaction congestion. Babylon’s phased rollout includes the activation of its PoS consensus validation mechanism and the forthcoming launch of its PoS chain, which will incorporate Bitcoin timestamping and cross-chain synchronisation features. Users will initially earn points instead of rewards, with plans to airdrop tokens to early adopters in the future.

The staking landscape for Bitcoin is rapidly evolving, with several projects partnering with Babylon to explore new staking use cases. Core, a Bitcoin Layer 2 network, has seen its total value locked (TVL) soar following the Pell Network launch, ranking second among Bitcoin Layer 2s and sidechains. Pell’s TVL has significantly contributed to Core's $314 million, while BounceBit has emerged as a notable network in Bitcoin’s ecosystem. With $62.1 million in TVL, BounceBit uses a dual-token PoS mechanism secured by Bitcoin and its native BB token. These developments reflect a growing trend in Bitcoin’s staking sector, driven by innovations like Babylon and increasing interest in Bitcoin’s utility beyond traditional applications.

🪙 Bitcoin

Bitcoin, launched in 2009, revolutionised finance with its decentralised technology, initially captivating only a niche group of enthusiasts. By 2010, early adopters who had purchased Bitcoin for mere cents saw its value rise to $0.09 per coin, sparking the growth of large-scale mining operations and the establishment of cryptocurrency exchanges. During the COVID-19 pandemic in 2020, Bitcoin's resilience as traditional markets faltered attracted significant investor interest, propelling its price to new heights. By April 2021, Bitcoin reached around $61,000 and peaked at $69,000 in November. Despite a subsequent downturn, known as the "crypto winter," Bitcoin surged past $75,000 on March 14, 2024, following the approval of Bitcoin Spot ETFs by the SEC, marking a significant milestone in its investment journey.

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