Bitcoin’s slump from November’s all-time high is hurting the shares of the crypto mining companies, but might nevertheless be positive for them because it will deter new entrants, investment bank Jefferies wrote.
When bitcoin prices continue to drop, smaller miners with higher electricity costs often reduce their operations, which will probably help publicly listed North American miners pick up “meaningful” market share, analyst Jonathan Petersen said in a note.“A slower growth trajectory for BTC price should encourage fewer new entrants to the network than if BTC’s price were to rise rapidly (i.e. 3Q21), allowing existing mining operators to grow their market share more quickly as they deploy additional ASICs,” Petersen wrote, referring to high performance mining computers.Bitcoin’s price has fallen about 39% since reaching its all-time high in November, while the network’s hashrate has continued its increase, reaching a record above 200 exahash per second (EH/s) on Jan. 1.On Monday, bitcoin fell below $40,000 for the first time since September 2021. Goldman Sachs said it expects the Fed to raise borrowing costs at least four times by the end of the year compared with a previous forecast of three rate hikes.Crypto mining stocks such as Marathon Digital, Riot Blockchain, Hive Blockchain and Hut 8 have all declined more than 4% on Monday.
A lower bitcoin price will deter new entrants and help incumbents gain market share.Read MoreCoinDesk