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Jefferies highlights political influence on crypto, adjusts miners’ PT

Published 30/07/2024, 11:40
© Reuters
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Investing.com -- The annual Bitcoin conference held in Nashville last week made waves with a series of high-profile promises and announcements. The event that bills itself as the world’s largest forum of crypto fans marked the largest gathering to date, attracting over 20,000 attendees, investment bank Jefferies said in a research report.

The conference saw massive political participation, with Donald Trump and multiple Republican politicians, as well as a handful of Democrats, in attendance. Jefferies noted that Trump's promises to appoint crypto-friendly regulators could tie the near-term price of Bitcoin to the outcome of the US Presidential election. 

Trump pledged to create a crypto industry presidential advisory council and make the US the “crypto capital of the planet.”

Turning to the fundamentals, Jefferies analysts cut Marathon Digital's (NASDAQ:MARA) target to $21.57 from $22 per share and lifted Argo Blockchain's (NASDAQ:ARBK) target to $1.63 from $1.20.

They highlighted that these price targets are derived from a discounted cash flow analysis, with key risks including lower Bitcoin prices, rapid increases in network hash rate, construction delays at hosting providers, higher costs of ASIC miners, and regulatory intervention.

Jefferies wrote that while the halving event is now behind us, many Bitcoin miners were surprised to see the network hashrate actually decline. Despite a 5% rise in Bitcoin prices since the halving, the hashrate dropped by 3% in May and 5% in June. 

This decline made mining profitability better than initially feared. According to Jefferies, "Mining revenue per EH is down roughly 40-45%, instead of a full halving of revenue. Major Bitcoin miners are still in growth mode, with Marathon Digital Holdings expecting to grow to 50 EH by the end of 2025, Riot Platforms (NASDAQ:RIOT) planning to reach 56.6 EH, and CleanSpark (NASDAQ:CLSK) targeting 50 EH by the same time.”

Meanwhile, some miners are shifting towards AI and GPU compute requirements to diversify revenue away from Bitcoin mining. Core Scientific (NASDAQ:CORZ), for example, has emerged from bankruptcy and shifted about half of their MW capacity towards AI data centers. 

"The shift towards AI is a clear effort to grab strong demand and diversify revenue," Jefferies added.

The investment bank also suggests more M&A activity is likely, with access to power being more valuable than mining fleets. Recently, Riot acquired Block Mining, a private platform with nearly 300 MW of power capacity across three sites in Kentucky.

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