According to CoinDesk, the bitcoin mining industry is at a critical point, as the approval of a spot bitcoin exchange-traded fund (ETF) could trigger a rally against a backdrop of record hashrates and the upcoming block reward halving that threaten the industry's revenues and profitability. JPMorgan analysts Reginald Smith and Charles Pearce favor mining operators that offer the best relative value considering their existing hashrate, operational efficiency, power contracts, funded growth plans, and liquidity.

The U.S. Securities and Exchange Commission (SEC) has delayed its decision on whether to approve a spot bitcoin ETF until this month. The crypto market is hopeful that any approval will lead to an influx of mainstream money into the sector. JPMorgan's top pick is CleanSpark, which offers the best balance of scale, growth potential, power costs, and relative value. The analysts noted that Marathon is the largest mining operator but has the highest energy costs and lowest margins, while Riot has relatively low power costs and liquidity but is the most expensive stock in their coverage universe.

The bank estimates the four-year block reward opportunity at around $20 billion at current bitcoin prices. However, the looming block reward halving, expected in the second quarter of 2024, could impact profitability. JPMorgan estimates that as much as 20% of the network hashrate is at risk from halving as less efficient mining computers are decommissioned.