China’s recent crackdowns on Bitcoin will boost profitability for US miners like MARA and RIOT, according to B. Riley analyst Lucas Pipes.
China’s Bitcoin Ban To Benefit MARA And RIOT
Pipes has raised price targets and estimates for both Marathon Digital (MARA) and Riot Blockchain (RIOT) amid the ongoing crackdowns in China.
The analyst says:
The decline in network hash rates, which has largely been driven by increased regulation in China, is bullish for North American miners like MARA and RIOT
The recent wave of crackdowns in the country started around April, and has since been responsible for the crash in Bitcoin’s price.
While it’s true that a decrease in BTC’s price should mean lesser gains for miners, profits are still up. Here is how:
As China hosts a huge chunk of the world’s Bitcoin mining farms, the crash in hashrate due to miner migration has been quite significant.
The lowered competition is enough to offset the losses due to a decrease in the crypto’s price. Hence, miners in other parts of the world like the US are now enjoying higher profits overall.
We believe the sudden decrease in miner competition has created an enhanced profitability window for MARA and RIOT, which could lead to the company outperforming expectations over the next couple of quarters.
However, something to note here is that the increase in profits is only temporary. Once miners from China successfully migrate to countries like US, the hashrate should kick back up. Things should return to normal then, including the profitability of Bitcoin mining.
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The analyst notes:
We believe the fair value for digital asset miners is in the low to mid-double-digit EV/EBITDA multiples—implying strong entry points for investors interested in the space.
As mentioned earlier, China’s crackdowns severely affected the BTC price. The nation’s reiteration of the crypto ban made the market crash by 50%.
Recent events like the shutdown of the Sichuan mining hub have also caused subsequent smaller dips in the price.
At the time of writing, Bitcoin is floating around $33k. The coin’s value is up about 2% in the past 7 days, while it’s down almost 12% in the last month.
Here is a chart showing the trend in BTC’s price:
BTC stagnates below the $35k zone | Source: BTCUSD on TradingView
While Bitcoin may seem to be heading on a downwards trend, it’s hard to say if it’s in a bearish market or not. Recently the coin has looked like it has frozen between the $30k mark, and the $35k one.
Whichever way it breaks out of this zone will probably decide whether the market will be bearish or bullish.