Bernstein notes that the underperformance in Bitcoin mining stocks could provide an accumulation opportunity for long-term investors.
Bitcoin mining stocks have experienced recent underperformance, attributed to two key challenges following the approval of spot Bitcoin exchange-traded funds (ETFs), according to a research report by Bernstein.
The first hurdle is “lower investor appetite to use them as a proxy”, and the second is a weakened BTC price, contributing to additional underperformance. The Valkyrie Bitcoin Miners ETF (WGMI), focused on publicly traded Bitcoin mining stocks, witnessed a nearly 38% decline this year, contrasting with the relatively stable Bitcoin price and broader equity markets.
Despite this slump, Bernstein suggests that the current underperformance could be an opportunity for savvy investors seeking to enter the mining stocks market. Analysts Gautam Chhugani and Mahika Sapra assert that akin to Bitcoin, the next two months present a dip-buying opportunity for Bitcoin miners.
They argue that these stocks will provide a “higher beta trade” during the next Bitcoin price inflection. While temporary weakness in Bitcoin is likely, with a potential short-term bottom in the $38,000-$42,000 range, the report suggests investors position themselves “structurally long” in anticipation of the next halving event slated for April.
In a separate note, Bernstein reaffirms its bullish stance on miners, recommending exposure to Bitcoin through miners offering a higher beta than Bitcoin itself. The broker favors outperform-rated stocks Riot Platforms (RIOT) and CleanSpark (CLSK).
Bitcoin Miners on Selling Spree
As per the recent on-chain data, Bitcoin miners have been liquidating their supplies heavily in recent days.
Crypto analyst Ali Martinez highlights a significant shift in Bitcoin miner behavior, revealing increased selling activity. According to data from @cryptoquant_com, miners sold nearly 10,600 Bitcoins (BTC) in the last 24 hours, amounting to an estimated $455.8 million. This surge in selling reflects a dynamic response in the cryptocurrency market, signifying a substantial move.
🚨 #Bitcoin Miners in Selling Mode: Recent on-chain data from @cryptoquant_com indicates a substantial increase in selling activity by #BTC miners. In just the last 24 hours, they've offloaded nearly 10,600 $BTC, valued at approximately $455.8 million! pic.twitter.com/JEtasWfR6N
— Ali (@ali_charts) January 17, 2024
Simultaneously, Bitcoin’s hashrate experiences a significant decline, hitting its lowest point in months. Miners are contributing power back to the grid amid extreme winter storms in the USA, ensuring essential services like hospitals have adequate electricity. This move is essential to save lives and keep families warm during severe weather conditions.
As one of the most effective global grid balancing tools, Bitcoin’s network hashrate has seen a 34% decrease since last Friday. The drop, from 629 EH/s to 414 EH/s, is attributed to ERCOT’s (Electric Reliability Council of Texas) restrictions on electricity usage for businesses due to adverse cold weather.