Bitcoin Halving Sparks Revenue Drop for Miners, Ignites High-Stakes Tech Race
Bitcoin Halving Set to Slash Miners’ Revenues, Igniting a High-Stakes Tech Race
As Bitcoin approaches its highly anticipated “halving” event on April 20, crypto miners are bracing for a significant revenue drop that could cost the industry roughly $10 billion annually. This reduction, which will cut the daily Bitcoin mining reward from 900 to 450 tokens, is expected to intensify the technological arms race among miners as they compete for diminishing returns.
The Business Times reported that Bitcoin enthusiasts have long viewed the “halving” event, which occurs once every four years, as crucial for maintaining the currency’s value. However, this time around, it is also expected to result in multibillion-dollar income decreases for the organizations that ensure the smooth operation of the digital currency, following a surge in their most expensive expenditures.
Marathon Digital Holdings, CleanSpark, and other miners, who compete for a fixed Bitcoin payout by solving complex mathematical puzzles using high-speed computers, have been investing in new equipment and acquiring smaller competitors to offset the revenue declines expected from the halving.
“This is the final push for miners to maximize revenue before their production takes a big hit,” said Matthew Kimmell, a digital asset analyst at CoinShares. “With revenues decreasing overnight, how each miner strategically responds and adapts could determine who comes out ahead and who gets left behind.”
While past halvings have seen Bitcoin reach new highs, helping to offset the periodic decline in mining earnings and operational costs, the industry’s margin of success is narrowing. Miners are facing increased competition for electricity from the booming and well-funded artificial intelligence (AI) industry, adding to the challenges they already face.
The rising price of Bitcoin has helped offset power costs, leading to growth in crypto mining. According to a JPMorgan Chase & Co. analysis, the aggregate market capitalization of 14 US-listed miners has nearly reached $20 billion since the introduction of specialized equipment in 2013. However, US-listed miners only account for about 20% of processing power, with private miners making up the rest and potentially facing greater vulnerability after the halving.
As excitement around the halving event grows, some traders are predicting a drop in mining stocks. Short interest in mining companies was over $2 billion as of April 11, according to S3 Partners’ estimates, with short interest accounting for about 15% of outstanding shares, three times higher than the US average.
The upcoming halving, the fourth since 2012, was preprogrammed by Bitcoin’s mysterious creator, Satoshi Nakamoto, to maintain the hard cap of 21 million tokens and prevent inflation. The landscape has changed significantly since the last halving, with much of the mining activity shifting from China to the United States, leading to increased competition for electricity.
“Power in the US is extraordinarily constrained,” said Adam Sullivan, CEO of Core Scientific. “Miners are now competing against some of the largest tech companies in the world for energy resources.”
With the AI industry attracting significant investment, miners are finding it challenging to negotiate favorable electricity tariffs with utility companies. As companies like Amazon, Blackstone, Google, and Microsoft invest billions in data centers, miners are facing intense competition for resources.
As the halving event approaches, the crypto mining industry is gearing up for a high-stakes tech race, with miners vying for diminishing returns in a rapidly evolving landscape.
