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The mining industry is well positioned to participate in a new bitcoin (BTC) cycle, Bernstein said in a research report Thursday.

The broker sees positive catalysts from the largest cryptocurrencys safe haven status, the reward halving due early 2024 and lower energy and equipment costs.

Rising bitcoin prices the largest cryptocurrency by market cap has climbed 70% this year and easing energy and equipment costs bode well for cash generation and the leverage position of miners, the report said. This should help improve gross margins in 2023.

If the bitcoin price continues to rally, Bernstein expects miners production in March and April to exceed their BTC liquidations, leading to a net increase in holdings of the cryptocurrency. This could help the companies debt repayment positions because bitcoin held as treasury assets can be liquidated at better prices to meet debt obligations.

In the medium to long term, the next main catalyst for miners is the halving, the note said. Roughly every four years, the total number of bitcoin that miners can potentially earn is cut by 50%.

Halvings make BTC more scarce by reducing supply, thus leading to prices rising, and this results in more miners joining the network, which increases the hashrate and the network security.

If the 2024 halving follows the same pattern as earlier ones, the BTC mining industry would see lower competitive intensity due to the sectors wipe-out in the bear market of 2022, and higher bitcoin prices, which would deliver improved profitability before additional mining capacity comes online, the report added.

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Bitcoin Mining Industry Is Well Positioned to Participate in a New Cycle: Bernstein - CoinDesk