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Bitcoin Mining Stocks: A Strategic Entry Point Before the Halving Event, Says Bernstein

Momentum builds for Bitcoin ahead of halving

Bernstein's recent report underscores a bullish forecast for Bitcoin, emphasizing its robust performance leading up to the halving. This event, anticipated to occur in April, traditionally slashes miners' rewards by 50%, yet historically triggers a bullish momentum for Bitcoin. The report notes: 

"The cryptocurrency has performed well before the halving and is likely to sustain momentum for the rest of the year, leading to new highs."

In the wake of approving spot bitcoin exchange-traded funds (ETFs) in the U.S., Bitcoin mining companies have seen a resurgence. 

Bernstein elaborates, signaling a turn in the market's tide:

"Bitcoin (BTC) mining companies appear to have bottomed out following the approval of spot bitcoin exchange-traded funds (ETFs) in the U.S. last month," 

This rejuvenation, coupled with positive ETF flows, lays a fertile ground for Bitcoin's growth trajectory, with the price already showcasing strength by hitting a one-month high of $46,000 early Friday in Europe.

Investment opportunities in mining stocks: Bernstein's perspective

Bernstein's analysis extends beyond Bitcoin's intrinsic value, pointing investors towards a strategic entry point into the cryptocurrency market through mining stocks. The brokerage firm champions Riot Platforms (RIOT) and CleanSpark (CLSK) as its top picks, both rated as outperform. The rationale behind this preference is multifaceted, rooted in the broader institutional narrative and the reflexive nature of Bitcoin as an asset.

Analysts Gautam Chhugani and Mahika Sapra wrote:

"Given the positive ETF flows momentum, resilient BTC price action and healthy miners adding capacity into the halving, we feel comfortable recommending investors to enter here for our preferred names," 

This sentiment is bolstered by the belief that: 

"The institutional narrative led by bitcoin ETFs is driving demand, and bitcoin being the reflexive asset, we expect higher price will bring higher ETF inflows, leading to new highs in 2024."

The halving event, while often seen as a 'risk-off' moment due to its pressure on miners, presents a unique opportunity according to Bernstein. The firm anticipates a market adjustment, expecting 15% of the bitcoin hash rate to diminish post-halving. However, "if prices remain strong, the decline could be more muted." Bernstein adds:

 "At $44,500 bitcoin price, most of the U.S. listed miners look relatively well positioned, even if their costs double post halving."

This strategic outlook is complemented by the recent shift in ETF flows, which have turned positive, providing Bitcoin and related investments with additional momentum. 

The report concludes, emphasizing the cyclical nature of Bitcoin's investment appeal:

"Consistent net ETF inflows means the overall market will lean bullish and reflexivity should ensure a higher price-higher inflows feedback loop,"