While the price of Bitcoin has been stagnant in the second quarter, the stock prices of some Bitcoin mining companies are soaring. Investment bank JP Morgan interpreted this as an ‘AI effect’.
What's new: JP Morgan said in a research report sent to clients on the 17th that mining-related stocks listed in the U.S. market, such as Core Sientific, TeraWulf, and IREN, fell in the first two weeks of June. Analysis showed that it rose by as much as 117% and as little as 70%.
According to them, Argo Blockchain was the only mining company to see a drop in price, with its new stock price falling 7%, with the price of Bitcoin falling 3%.
Background of the problem: Bitcoin mining companies are companies that are equipped with high-performance mining devices and specialize in mining Bitcoin. At the beginning of the business, it is necessary to purchase a specialized mining machine with high computational capabilities, so a lot of funds are required, and once the mining machine is running, business conditions vary greatly depending on profitability and electricity costs. If the Bitcoin price is good, you can make a lot of profit, but it is known that in a falling market, the ups and downs are severe enough to require the disposal of mining equipment.
What is interesting is that the stock prices of most mining companies are showing strong trends in the second quarter of this year, during the Bitcoin price downturn. As measured as of today (June 18), the price of Bitcoin in the second quarter fell 8.2% compared to the closing price in the first quarter. But why are the stock prices of mining companies rising?
Important point: JP Morgan sees the case as a starting point in early June when AI cloud company Coreweave proposed to acquire Core Scientific for $1.6 billion, 55% higher than the market capitalization. Core Scientific declined this offer and instead signed a partnership agreement that would allow it to host CoreWeave's AI-related services in its own data centers. The partnership is worth $3.5 billion over 12 years, according to the disclosure.
If you think about it, there is no law that requires a Bitcoin mining company to only mine Bitcoin. Coincidentally, the recent AI craze has increased the business opportunities that mining companies can contribute to. JP Morgan explained that companies such as Hut8 and Iren are also diversifying their business into AI.
What happens next: The competitiveness of Bitcoin mining, which is their main business, appears to have played a role in the strong stock prices of mining companies. While the market share of global Bitcoin miners has been declining since the halving last April, the share of U.S. miners appears to be rising.
JP Morgan explained, “In the case of Nasdaq-listed exchanges, the market share, which stood at 21% in April, reached 22.9% in May and is approaching 23.8% in June.
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