Bitcoin is heading toward another halving in April 2024, an event that will bring with it significance for miners of the largest cryptocurrency. That means exchange traded funds, such as the Invesco Alerian Galaxy Crypto Economy ETF (SATO ), are pertinent in the halving conversation as well. For its part, SATO is heavily allocated to bitcoin miners.
That makes the fund one of the most relevant assets regarding halving. In simple terms, bitcoin halving makes it more difficult to mine the digital currency, thus reducing rewards to miners.
In a recent note to clients, JPMorgan forecast that the Bitcoin Network Hash Rate will decline by 20% following the April 2024 halving. Investors that are new to cryptocurrency and mining equities are apt to interpret that as gloomy news. But halving also serves the aim of prompting miners, including SATO member firms, to take older software offline, thus making those companies more efficient.
‘Crucible Moment’ for Bitcoin Miners
JPMorgan told clients the bitcoin mining industry is at a “crucible moment.” This is because management teams at these companies consider the positive implications of a spot bitcoin ETF potentially coming to market while balancing the upcoming lower Bitcoin Network Hash Rate. Among the names the bank is bullish on is SATO component Cleanspark Inc. (CLSK), which it rates “overweight.”
“Not all miners created equal. Miners vary by scale, operating efficiency, access to capital and growth prospects. We believe CLSK, our top pick, offers the best balance of scale, growth potential, power costs, and relative value,” according to JPMorgan.
Shares of Cleanspark account for nearly 4% of SATO’s lineup. The bank also upgraded SATO holding Iris Energy Ltd. (IREN) to “overweight” from “neutral.”
Cleanspark and Iris Energy could be upside drivers for SATO because crypto mining industry observers are increasingly scrutinizing margins and power costs in the group. On those metrics, those two SATO holdings score well. That implies there’s an element of value with those names. That is a desirable trait at a time when value is hard to come by in this space.
“In this context, the report explains that the market cap of the 14 largest U.S. listed Bitcoin mining companies is 36% larger than what JPMorgan’s research team expects the whole industry can generate in revenues for the next four-year cycle, which is $20 billion,” reported Vinicius Barbosa for Finbold.
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