Miners Are Adopting the Same Bitcoin Acquisition Strategy as MicroStrategy: JPMorgan

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What to know:

  • Crypto miners are embracing MicroStrategy’s bitcoin acquisition strategy, due to pressure on profitability, the bank said.
  • Miners are increasingly financing their businesses via debt and equity offerings rather than selling their crypto reserves.
  • JPMorgan noted that the introduction of spot bitcoin ETFs in the U.S. has given institutional investors a more direct way of gaining bitcoin exposure than owning shares of mining companies.

As a seasoned analyst with over two decades of experience in the financial markets, I must admit that the current trend among crypto miners towards hoarding bitcoin and seeking further investments into it is quite intriguing. My first encounter with bitcoin was back in 2011 when it was trading at less than a dollar, so to see its metamorphosis into a sought-after asset by corporations like MicroStrategy and now miners, is truly remarkable.

In a recent report released on Wednesday, JPMorgan noted that MicroStrategy, the software firm established by Michael Saylor, isn’t the only large-scale corporate entity purchasing Bitcoin (BTC). Additionally, it was mentioned that crypto mining companies are also implementing a strategy of amassing Bitcoin.

The increase in accumulating bitcoin is due to increasing financial strain, resulting from the reduction in rewards (halving in April) and an escalating network mining complexity (rising hashrate), according to the report. Hashrate refers to the collective computational power utilized for mining and verifying transactions on a proof-of-work blockchain, acting as an indicator of competition within the industry and the level of mining difficulty.

Analysts headed by Nikolaos Panigirtzoglou suggested that this situation might have encouraged miners to stockpile bitcoin or increase their investments in bitcoin, as well as explore opportunities in AI (Artificial Intelligence) or HPC (High-Performance Computing) businesses.

As a crypto investor, I’ve noticed that miners like MARA Holdings (MARA) have followed a Bitcoin-acquisition approach akin to MicroStrategy, which they refer to as BTC yield. This strategy seems to be a response to the current challenges in the market, as suggested by JPMorgan.

Currently, MARA holds approximately 35,000 bitcoins, which equates to a value of around $3.5 billion, making it the second-biggest publicly traded company in terms of bitcoin holdings.

It turns out that the miners aren’t working their digital mineshafts in isolation. In fact, a company specializing in medical devices, Semler Scientific, has been actively investing in the world’s top cryptocurrency, accumulating a whopping $144 million worth of crypto assets.

The launch of spot Bitcoin exchange-traded funds (ETFs) in January within the U.S. market provides institutional investors with a more straightforward method to invest in bitcoin, according to the bank’s statement. Previously, shares of mining companies had served as a substitute for bitcoin investment, but since then, they have fallen short in performance compared to their previous levels.

It has been observed by the bank that instead of purchasing more bitcoin, miners are progressively turning towards borrowing money (debt) and selling shares (equity) as a means to fund their operations, rather than liquidating their cryptocurrency holdings for this purpose.

Mining companies have collected more than $10 billion in investments this year, breaking the record they set in 2021 with $9.5 billion.

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2024-12-13 13:40