Major Bitcoin Miners Could Face Profitability Issues Post-Halving, Analysts Warn
Summary:
Analysts from Cantor Fitzgerald have warned that eleven major Bitcoin mining companies might struggle to mine Bitcoin profitably if its price doesn't increase significantly post the halving event. Firms including Marathon Digital, Riot Platforms, and Core Scientific could face increased operational costs exceeding their revenues. The UK-based miner Argo Blockchain and Florida's Hut 8 Mining could be the worst hit. However, Bitdeer and CleanSpark could maintain profitability if Bitcoin's price averages around $40,000 and there are no major changes in the hash rate.
Analysts from the financial corporation Cantor Fitzgerald suggest that eleven major Bitcoin (BTC) mining companies could face difficulties in mining BTC profitably if the price doesn't rise substantially after the halving event. The analysis, which was mentioned in a post by Matthew Shultz, Co-founder and Executive Chairman of CleanSpark, indicates that multiple Bitcoin mining firms such as Marathon Digital, Riot Platforms, and Core Scientific could experience increased pressure after the Bitcoin halving makes their operation costs higher than their revenues.
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UK-based miner Argo Blockchain and Florida's Hut 8 Mining could potentially face the worst of this effect as the most unprofitable post-halving, with their respective costs-per-coin being $62,276 and $60,360, should the Bitcoin's price remain the same. As per the update from January 5, Hut 8 reported reserves totalling 9,195 BTC, valued at $377 million based on the current price.
The only companies expected to remain profitable after the halving, according to Cantor's analysis, are Bitdeer, a mining company from Singapore, and US-based CleanSpark. This prediction is estimated under the condition that the average bitcoin price stays at around $40,000, and the hash rate does not undergo any drastic changes.
Cantor's "all in per coin" metric measures all costs that a Bitcoin miner accounts for in the process of obtaining a single bitcoin. This includes electricity costs, hosting fees, and other direct expenses.
The halving of Bitcoin, planned for April, will slash Bitcoin mining rewards by half. While many market observers consider this supply cut a bullish move for Bitcoin's price in the long run, it could present problems for miners with high operational costs if the price doesn't rise enough to cover their expenses.
While the mining revenue of Bitcoin is strongly linked to its market price, it's important to note that miners can also make use of hedging strategies to mitigate potential losses due to Bitcoin's volatile price. Associate Director of Derivatives at Bitcoin miner Luxor, Dan Rosen, said that miners often resort to buying derivative products like hash rate futures contracts and Bitcoin-related options to balance unpredictable volatility. None of the miners mentioned in the report immediately responded when contacted for their comments.
In related news, MakerDAO is reportedly planning a return of 'DeFi summer' as per Rune Christensen.
Published At
1/26/2024 4:36:25 AM
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