Only These Two Crypto Mining Companies May Survive the Bitcoin Halving

9 months ago 1

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As the Bitcoin network braces for its fourth halving event, anticipated around April 2024, the crypto mining sector faces a seismic shift that could lead to significant consolidation.

Analysts claim that only two mining firms, Marathon Digital Holdings (MARA) and Iris Energy (IREN), will survive the challenges of Bitcoin halving.

Bitcoin Mining Firms Struggle With Operational Costs

The halving, integral to Bitcoin’s protocol to keep it deflationary, will cut the block reward from 6.25 to 3.125 BTC. Historically, this event has kickstarted Bitcoin’s bull rallies.

Ali Martinez, BeInCrypto’s Global Head of News, noted that following the 2012, 2016, and 2020 halvings, the price of BTC surged by 11,000%, 2,850%, and 700%, respectively. More importantly, the last two bull markets after the halving were similar in length, lasting 518 days and 549 days each. For this reason, Martinez expects a similar scenario to play out this year.

“If the upcoming bull market follows historical trends, we might anticipate the next Bitcoin market top around April or October 2025,” Martinez said.

Miners' Revenue Decline After Every Halving Event

Despite the potential for a new bull market, the halving puts great pressure on Bitcoin miners by reducing their revenue instantly by 50% unless the price of BTC rises accordingly.

SeekingAlpha examined major Bitcoin mining entities’ cost structures, operational efficiencies, and strategic positioning. The company concluded that only MARA and IREN possess the operational efficiency and strategic foresight to endure the upcoming Bitcoin halving.

Firms Prepared to Tackle Bitcoin Halving Challenges

MARA and IREN excel in maintaining competitive total business costs per Bitcoin mined, a crucial element for their post-halving sustainability. Amid rising costs and diminishing returns across the industry, these two companies showcase exceptional adaptability and strategic growth. Hence, this positions them as probable survivors in a consolidating market.

The impending halving underscores a pivotal moment for Bitcoin miners, accentuating the importance of operational efficiency and strategic growth. As the sector braces for reduced block rewards, the sustainability of mining operations comes into sharp focus. Interestingly, MARA and IREN emerged as frontrunners, equipped to navigate the challenges ahead.

Quarter (CY)	IREN	Bitfarms (BITF)	CleanSpark (CLSK)	Riot Platforms (RIOT)	Hut 8 Corp. (HUT)	HIVE Digital Technologies (HIVE)	Marathon Digital Holdings (MARA)
2023Q3		44,600	60,452	65,800*	80,500	53,700	39,900
2023Q2	33,640	41,300	37,050	51,500*	70,800	45,400	39,500
2023Q1		26,600	33,276	97,740	70,900	37,000	32,100
2022Q4		34,200	30,500	53,200	59,900	48,000	44,400

Total Mining Cost Per Bitcoin. Source: SeekingAlpha

The broader implications of this consolidation extend beyond the mining sector, potentially influencing Bitcoin’s market dynamics and its decentralized ethos.

“While sector consolidation may benefit some miners in the short run, it is detrimental to the entire Bitcoin ecosystem in the long run. This kind of consolidation is fundamentally unfavorable to any trustless protocol because it makes a protocol more centralized,” SeekingAlpha analyst said.

As fewer, more dominant players emerge, the risk of centralization within the mining sector could pose challenges to Bitcoin’s trustless protocol, underscoring the delicate balance between operational sustainability and the ethos of decentralization.