D.A. Davidson analyst Christopher Brendler has downgraded shares of bitcoin (BTC-USD) miners Core Scientific (NASDAQ:CORZ) and Argo Blockchain (NASDAQ:ARBK) on Monday to Neutral from Buy, as high power prices and rising network competition squeeze profitability and liquidity. Indeed, the bitcoin (BTC-USD) network hashrate, which measures how much computing power is being used to process transactions on the blockchain, is hovering around all-time highs, standing at around 259M terahashes per second, underscoring gross margin compression across the mining industry, according to Blockchain.com data. Brendler laid down some potential reasons for the increased competition, including: "(1) new projects started in the 3Q21 bull market are finally coming online, (2) cooler fall weather reducing both involuntary and voluntary curtailments, and (3) new Bitmain XP deliveries (hyperefficient new models can still mine quite profitability."Since electricity costs are one of the miners' biggest expenses, it's important to note that the increased competition comes at a time when inflation and natural gas supply issues keep fueling high electricity costs, thus reducing gross margins. At the same time, though, Brendler reiterated Riot Blockchain (NASDAQ:RIOT) and Marathon Digital (NASDAQ:MARA) with Buy ratings, "as both have low-cost power, funded growth plans, and ample liquidity to capitalize on the impending shakeout," he noted.Overall, the ...
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