March 27, 2024
Bitcoin Halving Expected to Impact Miners' Profits
Bitcoin Halving

Bitcoin Halving Expected to Impact Miners’ Profits

As the upcoming Bitcoin halving event draws near, mining companies are preparing for notable increases in costs. CoinShares has conducted an analysis on the consequences of the halving, identifying the enterprises that are most resilient to withstand the challenges in a recent report. The halving event, set for April 2024, will halve the block reward for miners, slowing down the rate of new Bitcoin production. This is anticipated to result in heightened production costs and cash outlays for miners.

According to CoinShares’ projections, the average production cost and cash expenses are expected to rise from around $16,800 and $25,000 per Bitcoin in the third quarter of 2023 to $27,900 and $37,800, respectively. The analysis indicates that Bitcoin mining companies such as Riot, TeraWulf, and CleanSpark are well-positioned to navigate the halving event due to their cost structures and extended sustainability. However, all miners are likely to face difficulties if the price of Bitcoin drops below $40,000.

CoinShares underscores that although most miners are enhancing their fleet efficiency, the direct cost structure is not improving as they will need to escalate their power consumption and energy utilization to mine the same quantity of Bitcoin. Electricity costs per Bitcoin pre- and post-halving constitute approximately 68% and 71% of miners’ total cost structure, respectively.

The analysis also spotlights the challenges encountered by Core Scientific, which recently concluded an oversubscribed $55-million equity financing round in an attempt to regain financial stability. In essence, the Bitcoin halving event is expected to tighten miners’ profit margins, and only the most efficient and strategically positioned firms are likely to sustain profitability.

Image by Darwin Laganzon from Pixabay

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