Bitcoin’s ‘halving’ may inflict a $10 billion hit on crypto miners

Enthusiasts of Bitcoin have long regarded the “halving” as a crucial event, occurring once every four years, pivotal in sustaining its value. However, this time, it’s not just about bolstering Bitcoin’s worth; it’s poised to unleash multibillion-dollar declines in revenue for the very companies vital to the currency’s smooth operation, right on the heels of a surge in their major costs.

Scheduled around April 20, the halving will slash the daily Bitcoin rewards for “miners” who validate transactions from 900 to 450. Given Bitcoin’s current price, this adjustment could translate to industry-wide revenue losses of approximately $10 billion annually. Companies like Marathon Digital Holdings and CleanSpark, engaged in a fierce competition for Bitcoin rewards by employing high-speed computers to solve complex puzzles, have proactively invested in new equipment and pursued acquisitions of smaller competitors to mitigate the impending revenue decline.

Matthew Kimmell, a digital asset analyst at CoinShares, asserts, “This is the miners’ final opportunity to maximize revenue before facing significant setbacks in production. With an overnight decrease in revenues across the board, how each miner strategically responds and adapts will undoubtedly determine who emerges victorious and who lags behind.”

Admittedly, Bitcoin has historically surged to new heights following previous halving events, partially offsetting the periodic drop in mining rewards and rising operational costs. This time, however, the industry’s margin for success is becoming increasingly narrow. Miners must continually escalate investments in an unending technological arms race for diminishing rewards. Moreover, amidst the already energy-intensive validation process, miners now contend with heightened competition for power from the burgeoning and well-funded artificial intelligence sector.

While the soaring Bitcoin price has mitigated some of these power costs and propelled growth in crypto mining, the challenges persist. Since the introduction of specialized mining machines in 2013, the combined market capitalization of 14 U.S.-listed miners has surged to approximately $20 billion, as per an April 1 report by JPMorgan Chase & Co.

Although U.S.-listed miners dominate the industry’s public face, they represent only around 20% of the sector’s computing power, leaving the remainder in the hands of private miners. Private entities may find themselves more vulnerable post-halving, as they typically rely on debt financing or venture capital, while public companies can raise funds through share sales.

As anticipation builds around the halving event, some traders are betting against mining stocks. Total short interest, reflecting the dollar value of shares borrowed and sold by bearish traders, reached approximately $2 billion as of April 11, according to an estimate from S3 Partners LLC. This short interest comprises nearly 15% of the group’s outstanding shares—three times the U.S. average of 4.75%, highlighting heightened market skepticism, notes Ihor Dusaniwsky, managing director of predictive analytics at S3.

The fourth update since 2012, programmed by the enigmatic Bitcoin creator Satoshi Nakamoto, steadfastly maintains the hard cap of 21 million tokens, ensuring its resilience against inflationary pressures as a currency.

Contrasting starkly with its situation four years prior, when Bitcoin traded below $9,000 and mining predominantly occurred in China, the landscape has since shifted dramatically. A significant portion of mining operations now unfolds within the United States, intensifying competition for electricity resources.

Adam Sullivan, CEO of Core Scientific Inc. in Austin, Texas, a leading public Bitcoin mining firm, asserts confidently, “Power availability in the US is exceptionally tight.” Miners find themselves in direct competition with global tech giants vying for energy resources, as these companies establish data centers, equally voracious consumers of energy.

The burgeoning AI sector is attracting staggering investments, tightening the market for favorable electricity rates with utility providers. Inc. is poised to allocate nearly $150 billion to data center infrastructure, while Blackstone embarks on constructing a $25 billion domain of data facilities. Simultaneously, heavyweights like Google Inc. and Microsoft Corp. are channeling substantial funds into their own ventures.

Power Grab

“The artificial intelligence community is now outbidding Bitcoin miners by three to four times the rates from last year,” confidently stated David Foley, co-managing partner at Bitcoin Opportunity Fund, a venture firm deeply entrenched in both public and private mining ventures. This phenomenon is not confined to one region but is sweeping across the globe, according to Foley.

Moreover, tech behemoths hold a distinct advantage in procuring electricity from utilities, thanks to their stable revenue streams, unlike the volatile income tied to cryptocurrency mining. Taras Kulyk, CEO of SunnyDigital, a crypto-mining services provider, highlights that utilities perceive tech giants as more dependable customers due to their robust financial standing.

Given this fierce competition, renewing low-cost power contracts may become increasingly challenging once existing agreements lapse. Greg Beard, CEO of Stronghold Digital Mining Inc., notes that large-scale Bitcoin miners typically secure energy prices for several years, underscoring the importance of strategic planning in navigating this landscape.

Computer Power

Miners eagerly vie for a fixed reward, where the victor claims the entirety upon successfully processing a block of transactions on the Bitcoin blockchain. Currently standing at 6.25 Bitcoin, this reward will soon be halved to 3.125 Bitcoin.

As computing power reigns supreme in the mining arena, the path to securing rewards grows steeper. Mining difficulty, an indicator of the computational resources required to mine Bitcoin, has surged nearly sixfold since the 2020 halving, as reported by’s biweekly update. This surge stems from an expanding pool of miners coupled with a stagnant reward.

To stay ahead, companies are swiftly upgrading their technology, deploying more efficient machines to bolster their computing prowess. Public Bitcoin miners have successfully raised billions of dollars through the issuance of new shares to finance these acquisitions.

However, this avenue remains closed to private mining enterprises, which command approximately 80% of the industry’s computational might in the US. During the previous bullish phase in 2021, these entities predominantly resorted to debt financing to manage expenses. Yet, the landscape has shifted, with lenders tightening their purse strings following the crypto market crash of 2022, leading to a scarcity of viable deals.

Young Cho, CEO of Blockhouse Digital, remarked, “It’s a challenging environment out there,” as miners find themselves fruitlessly scouring for lending opportunities.

Amid this turbulence, some private miners are exploring alternative funding avenues, such as venture capital rounds, according to Foley of the Bitcoin Opportunity Fund.

For those grappling with negative cash flows and restricted borrowing options, tough decisions loom. As Kimmell of CoinShares notes, they must weigh the prospect of financing through private equity or utilizing reserves stashed on their balance sheets. Alternatively, if confidence in future mining revenues wanes, the exit door from the market may become increasingly tempting.


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