Wall Street investment bank BTIG has cut its average 12-month price targets for bitcoin miners by 65%, citing the key cryptocurrency's decline and funding issues.
"While we expect BTC miner stocks to fluctuate with the BTC price (as most commodity stocks do with any commodity), we believe the other reason miners are underperforming relative to the BTC price is due to concerns about funding growth (we think a lower BTC price means less capital for growth)," Greg Lewis, an analyst at BTIG, wrote in a research report Friday.
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Bitcoin miners have taken a hit this year, with an average decline of more than 50%, as the cryptocurrency's price has plummeted following its bull market in 2021. The damage has been compounded for miners as the hash rate of the Bitcoin network combined with the difficulty of mining has risen to near record highs this year, squeezing their profit margins.
These market conditions have led investors to worry that miners will not be able to raise the funds they need to grow, as building a large-scale mining operation is capital intensive. However, BTIG's Lewis believes that larger companies have a better chance of raising funds even in a bear market. "In a market with stagnant BTC prices, access to capital has become much more important (think rig, infrastructure and BTC financing), and we expect large incumbent miners to continue to have access to capital at the expense of smaller and newer miners," he wrote.
Lewis maintained his buy rating on the four mining stocks he covers - Riot Blockchain, CleanSpark, Core Scientific and Marathon Digital - and remains optimistic about the industry's long-term prospects. "Not surprisingly, our BTC mining price targets are very sensitive to our BTC price estimate; for example, a near-term BTC price of around $40,000 implies a 30-40% upside potential for our price targets, while a $50,000 BTC price implies a 90-100% upside potential for our price targets," he wrote.
This article was translated by Andres Engler.