As the upcoming Bitcoin halving event draws near, mining companies are preparing for substantial increases in operational costs. In a recent report, CoinShares has analyzed the implications of the halving and identified companies that are best equipped to withstand the challenges.
Scheduled for April 2024, the halving event will halve the block reward for miners, slowing down the rate of new Bitcoin creation. This is expected to result in a rise in production costs and cash expenses for miners.
CoinShares projects that the average production cost and cash expenses will escalate from approximately $16,800 and $25,000 per Bitcoin in the third quarter of 2023 to $27,900 and $37,800, respectively. According to the analysis, Bitcoin mining firms such as Riot, TeraWulf, and CleanSpark are in a favorable position to navigate the halving event due to their cost structures and extended sustainability. However, all miners will encounter challenges if the Bitcoin price drops below $40,000.
It’s emphasized that while most miners are enhancing fleet efficiency, the direct cost structure isn’t improving as they will need to increase power draw and energy consumption to mine the same amount of Bitcoin. Electricity costs per Bitcoin, both pre- and post-halving, constitute around 68% and 71% of miners’ total cost structure, respectively.
The analysis also sheds light on the difficulties faced by Core Scientific, which recently concluded an oversubscribed $55-million equity financing round to secure financial stability. In essence, the Bitcoin halving event is anticipated to squeeze miners’ profit margins, and only the most efficient and strategically positioned firms are likely to sustain profitability.
