Bitcoin miner stock gains are outpacing the price of Bitcoin.
The halving happening in April will cut rewards for miners, and could drive the price of Bitcoin higher because of the lower supply of new coins.
The most efficient miners will be the ones best equipped to handle the halving, industry players say.
Bitcoin miner stocks are outpacing the price of Bitcoin, which hit its highest level since 2021 as the cryptocurrency goes mainstream with the recent approval of Bitcoin Exchange-Traded Funds (ETFs).
Those gains, however, may not stick for some miners with the four-year halving—when the reward miners get for mining gets cut in half to ensure Bitcoin's scarcity—happening in April. The halving results in the number of new coins created getting cut by 50%, and the rewards for miners being cut in half.
The fall in revenue could to some extent be compensated by rising Bitcoin prices resulting from the lower supply of new coins. But companies with less efficient machines and operations may have a harder time.
Miners with higher electricity costs or lower-efficiency machines "will have a difficult time mining profitably post-halving," Luxor Technology Chief Operating Officer Ethan Vera said. Luxor provides services and products for the mining industry. "Many companies are stuck in power contracts, or benefit from top line gross revenue and as such might continue to mine despite not being profitable. Companies' balance sheets will determine how long they can survive doing that."
The halving comes amid renewed interest in Bitcoin after the Securities and Exchange Commission approved 11 Bitcoin ETF applications in January, paving the way for investors to access the alternative asset more easily.
Winners and Losers
Cantor Fitzgerald analyzed 13 Bitcoin miners in January and found that at the then price of Bitcoin at $40,000, only two miners, CleanSpark (CLSK) and Bitdeer (BTDR), would be able to profit from mining. But at above $50,000 now, more miners would be profitable. The ones facing the highest costs were Hut 8 (HUT) and Argo Blockchain (ARBK). It costs them $60,360 and $62,276, respectively, to mine each coin.
Hut 8 and Argo Blockchain did not respond to requests for comment.
Riot Platforms (RIOT) said it has positioned itself as one of the "lowest cost miners" ahead of the halving. It has the third-lowest cost at nearly $44,000 per coin, according to Cantor Fitzgerald.
"Riot also intends to leverage our ability to obtain Bitcoin at a significant discount to its current market price by retaining a greater proportion of our monthly Bitcoin production in the near term," the company said in a January statement. "This is made possible by our strong liquidity profile, and will further cement our position as one of the largest holders of Bitcoin.”
Marathon Digital (MARA) is preparing for the halving with plenty of cash on hand.
"We need to be resilient," Chief Executive Officer Fred Thiel said in a video last month. "If the price of Bitcoin let's just say it drops to $30,000 at the time of the halving, not many miners are going to be able to operate profitably and how many miners have enough cash on the balance sheet to be able to survive six to 12 months, maybe 24 months before it becomes profitable to mine again when Bitcoin has moved back up?"
Marathon's cost per coin is $50,559, making it profitable by a hair at today's price.
Bitcoin miner CleanSpark, which according to Cantor Fitzgerald is profitable with a cost of nearly $37,000 per coin, expects some 30% of machines currently hashing to be forced to unplug, according to Executive Chair Matthew Schultz. That's an opportunity for growth.
"We’re aggressively seeking opportunities for M&A" to buy facilities and infrastructure, Schultz said.
Correction— Feb 20., 2024: This article was updated to provide greater clarity on the number of Bitcoin ETFs approved.
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Bitcoin miner stock gains are outpacing the price of Bitcoin. The halving happening in April will cut rewards for miners
miners
A miner is a person who extracts ore, coal, chalk, clay, or other minerals from the earth through mining. There are two senses in which the term is used. In its narrowest sense, a miner is someone who works at the rock face; cutting, blasting, or otherwise working and removing the rock.
Historically, though, miners' profits have increased in the months after each halving (as bitcoin's price increased). According to popular financial ratios (price-to-earnings, price-to-sales, and price-to-book), bitcoin mining stocks could be trading at good value vs the general US stock market.
Bitcoin halving has significant implications for its network. For miners, the halving event may result in consolidation in their ranks as individual miners and small outfits drop out of the mining ecosystem or are taken over by larger players.
Eventually, the block reward will become zero once all 21 million bitcoin are mined, and the only reward for miners will be transaction fees. The most recent halving brought the block reward down to 3.125 BTC from 6.25 BTC.
Aside from crypto mining stocks, Virginia-based software company MicroStrategy (MSTR) is well-positioned to benefit from the halving if the price appreciation that followed the previous halvings reoccurs. MicroStrategy's shares are up 83% this year, roughly double bitcoin's 44% gain.
If Bitcoin starts to go on another post-halving rally, this number could spike even more, leading to an even higher Bitcoin price, leading to... you get the idea. This cycle could easily last 12 months or more. So, yes, you should be buying Bitcoin ahead of the halving.
Bitcoin mining is still profitable if you have a capable system, join a mining pool, and can pay off your fixed expenses in a reasonable amount of time. However, any expectations of digital riches should be tampered with reason.
We can predict that if the operational cost is the same, and Bitcoin price remains above $54,000.00 after the halving, then Bitcoin is still worth mining.
The bitcoin halving reduces the block reward for miners by 50%, meaning the rate at which new bitcoins enter circulation is cut in half. While the immediate impact on bitcoin's price may not be significant, the halving is expected to have long-term effects on the supply-and-demand dynamics of the cryptocurrency.
The top publicly traded miners include Riot Platforms (RIOT) and Marathon Digital (MARA). Core Scientific remains optimistic it can weather the halving and keep its spot as one of the largest bitcoin miners.
The bank's analysis of open interest in bitcoin futures shows that the cryptocurrency is still considered overbought. JPMorgan said it expects bitcoin to fall after the reward halving. The bank's analysis shows that the cryptocurrency remains overbought. Miners will be most affected by the event, the report said.
With an expense ratio of 0.75%, the ETF holds mining stocks, such as Marathon Digital, CleanSpark, Riot Platforms, Bit Digital (NASDAQ:BTBT), Cipher Mining (NASDAQ:CIFR), and Bitfarms (NASDAQ:BITF) to name a few.
What will the impact be on the bitcoin price? Halving reduces the supply of new bitcoins, which should in theory increase the price. It is an economic axiom that if demand for an asset remains stable while its supply decreases, its price should go up.
Solana. Stacks, Fetch.ai, and Solana are three cryptos that could soar in value in 2024. The Bitcoin (BTC -0.60%) halving on April 19 was one of the most anticipated events of the year for crypto investors.
Bitcoin price will surge with the Bitcoin halving coming closer. What is the projected price of Bitcoin in 2024? The projected price of Bitcoin in 2024 will range between $35,000 and $120,000, with an average of $77,500.
At one point, Bitcoin's supply growth rate exceeded 10%, but it was cut to about 1.75%. The BTC halving will continue until all 21 million coins are mined, sometime in the year 2140. Currently, around 19.70 million BTC coins are circulated in the cryptocurrency market.
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