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Bitcoin (BTC-USD) climbed 9.3% for the month of November, in a move that further buoyed bitcoin miners’ shares and their profitability prospects.
These miners are in the business of receiving bitcoin (BTC-USD) as a reward for completing “blocks” of verified transactions by solving a complex math problem on the blockchain. So, all else equal, mining companies want to see rising BTC prices since that would bolster their top line. But, to ensure they are profitable, miners must keep the cost of equipment and electricity under control.
Last month’s bitcoin (BTC-USD) rally was enough to offset the increase in the network hashrate – a measure of industry competition that hit a record high for the eleventh straight month, J.P. Morgan analyst Reginald Smith, who tracks a group of 14 U.S.-listed BTC miners – wrote in a recent note to clients.
One of the main drivers of bitcoin’s (BTC-USD) jump during the month include continued confidence that the U.S. Securities and Exchange Commission will soon approve an exchange-traded fund that invests directly in bitcoin. Many have suggested that a spot bitcoin ETF, if approved, could open crypto markets to players in traditional finance.
Another development is growing hopes that the Federal Reserve will start to cut interest rates next year from a 22-year high. But both narratives, particularly the ETF one, have contributed to the highest-profile crypto’s ~130% surge over the past 11 months from last year’s market downturn.
J.P. Morgan’s Smith said CleanSpark (CLSK), which has seen its stock soar nearly 275% year-to-date, is his top pick among BTC miners, given its “combination of scale, solid fleet efficiency and power costs.” He views the stock with an Overweight rating. Iris Energy (IREN) is another miner he rates Overweight, as the company eyes an outsized hashrate expansion over the near-term, as well as “cheap power contracts and additional expansion opportunities at its Childress site, and great value relative to peers.”
The sell-side analyst isn’t bullish on all the miners he covers. Marathon Digital Holdings (MARA), given its high variable cost base, is rated Underweight. And, although Riot Platforms (RIOT) has a “clear path to meaningful hashrate expansion,” the stock already appears “to be pricing in meaningful bitcoin price appreciation (or a decline in the network hashrate),” the note said.
It will be interesting to see how miners’ bitcoin (BTC-USD) production and hashrate growth fared last month. A number of them, including CleanSpark (CLSK), posted strong stats for October – when BTC surged 28.8% – despite an increase in mining difficulty.
Other bitcoin miners: HIVE Digital Technologies (HIVE), BIT Mining (BTCM), Hut 8 Mining (HUT), Bitfarms (BITF), Bit Digital (BTBT), Greenidge Generation (GREE) and Core Scientific (OTCPK:CORZQ).
