JPMorgan Picks RIOT, IREN for Bitcoin Halving, CLSK Up 50%

Key Takeaway

• JPMorgan recommends RIOT and IREN as top mining stocks for the upcoming Bitcoin halving, citing attractive valuations.
• RIOT and CLSK expected to show significant hash rate growth; RIOT enjoys the lowest power costs among peers.
• Despite overall mining stock downturn YTD, CleanSpark (CLSK) shares up over 50%, with a 13% rally on Thursday.

Mining Stocks Dip Before Halving

JPMorgan's recent analysis has shed light on the significant downturn in the market cap of U.S.-listed bitcoin miners, which saw a 28% drop, amounting to a $5.8 billion decrease to $14.2 billion from March 31 to April 15. This decline in mining stocks, which all underperformed against bitcoin with at least a 20% loss, precedes the anticipated bitcoin halving event. Despite this downturn, JPMorgan remains optimistic about certain companies, particularly Riot Platforms (RIOT) and Iris Energy (IREN), highlighting their "attractive relative valuations."

Halving Event Sparks Volatility Predictions

The bitcoin halving, expected to occur around April 19-20, is anticipated to significantly alter market dynamics by reducing the reward for mining new blocks. This event, which historically leads to price increases by slowing the rate of new bitcoin entering the market, is expected to cause "heightened volatility and trading volume" in both bitcoin and mining stocks, according to JPMorgan analysts Reginald Smith and Charles Pearce. They also observed that mining profitability was lower in the first two weeks of April, as network hashrate growth outpaced bitcoin price appreciation.

Goldman Warns Against Overreliance on Past Cycles

Goldman Sachs offers a cautionary perspective, advising investors against assuming that past halving cycles will predict future outcomes. They point to the differing macroeconomic conditions of previous halvings, such as lower interest rates and rapid M2 money supply growth, which are not present in today's environment of high inflation and high-interest rates. Despite a 50% rally in bitcoin prices this year, partly attributed to the launch of U.S.-based spot ETFs, Goldman suggests that the major post-halving surge may already be priced in, potentially setting the stage for a "sell-the-fact" pullback post-halving.

Street Views

• Reginald Smith, JPMorgan (Bullish on RIOT and IREN):

  "With the bitcoin halving on the horizon, we expect heightened volatility and trading volume in both bitcoin and mining stocks... we think recent weakness offers an attractive entry point, and are especially bullish on RIOT and IREN, which we think offer attractive relative valuations."

• JPMorgan Analyst for Riot Platforms (Bullish on Riot Platforms):

  "Riot Platforms has been the worst performing stock in JPMorgan’s mining coverage universe... [but] poised to show the most growth in their hash rates due to newly built and acquired facilities."

• JPMorgan Analyst for Iris Energy (Overweight rating on Iris Energy):

  "[Iris Energy is tracking for 16.4 EH/s at the end of this year.]"

• JPMorgan Analyst regarding CleanSpark (Neutral with positive outlook):

  "CleanSpark... a 'great halving play' based on its relatively efficient fleet, low all-in mining costs, and favorable hashrate compares, which should drive record revenues and profits post-halving."