Bitcoin Miners Race Ahead of Halving

Following the halving event, Bitcoin miners' breakeven point has increased from $23,000 to $43,000 USD, prompting them to seek various strategies to stay afloat.

Bitcoin mining is an energy-intensive process. Miners use specialized computers to verify transactions, create new blocks, and receive Bitcoin rewards (BTC). However, the blockchain algorithm is designed to halve the rewards for miners every 210,000 new blocks created. This algorithm is called Bitcoin halving.

The upcoming Bitcoin halving event is projected to take place at the end of April. At that time, the block reward will decrease from 6.25 BTC to 3.125 BTC, forcing miners to adapt strategies to survive.

Miners' Challenges

Data from BTC.com shows that Bitcoin mining difficulty has continuously reached new highs recently. In the cryptocurrency realm, hash rate, also known as the hashing power, reflects the computational power of the mining network. Miners use powerful computers to process millions of calculations per second and earn Bitcoin rewards.

On March 14th, the Bitcoin network's hash rate reached an all-time high of 83.95 exahashes per second (EH/s), up 5.8% from the previous peak on February 29th at 79.35 EH/s. BTC.com forecasts that the difficulty will continue to increase to 84.17 EH/s by March 27th.

The profitability of 11 out of 13 largest Bitcoin mining companies would be at breakeven or loss after halving if the Bitcoin price were at $40,000 USD. Source: Cantor Fitzgerald

According to Cointelegraph, the increasing hash rate implies fiercer competition among miners. Small miners with weak computing power cannot compete at this difficulty level and are forced to exit the network. Meanwhile, large mining farms also have to invest in new mining rigs to maintain their edge. Additionally, there's increasing pressure on electricity costs, raising the input costs for mining new Bitcoins.

However, the halving event in April poses the biggest challenge yet. Fred Thiel, CEO of Marathon, one of the largest Bitcoin mining companies in the U.S., told Bloomberg: "After the halving, some miners will be eliminated from the network when there's no longer profit due to reduced revenue. A simple calculation, if the average breakeven point for the industry is $23,000 USD per mined Bitcoin, it will increase to around $43,000 USD after halving."

Apart from the investment in specialized mining rigs, miners have to balance costs related to electricity prices, storage, and various other expenses. At the end of January, research firm Cantor Fitzgerald indicated that at least 11 out of the 13 largest Bitcoin mining farms are "at risk" after halving.

The Halving Preparation Race

Besides smaller miners struggling to balance profits, large mining farms are scrambling to expand their scale to offset sudden profit declines after halving.

CEO Fred Thiel mentioned that instead of relying on external power sources, Marathon has acquired large-scale power plants to proactively balance costs. On March 14th, the company acquired a 200-megawatt power plant in Texas for over $87 million USD. Earlier, they also spent $179 million USD to acquire other energy centers. The company's ownership ratio of energy supply for its mining farms increased from 3% at the end of last year to 53% after three months.

Fred Thiel said, "We will continue to stay in the Bitcoin mining industry. To balance the breakeven point, we need to control mining costs, mainly electricity. In the long run, a stable energy supply will ensure we maintain a competitive advantage over rivals."

While some large mining farms seek to lower electricity costs, others are actively investing in additional specialized mining rigs. A spokesperson for Core Scientific, one of the largest Bitcoin mining companies in the U.S., stated that they have purchased the latest Bitcoin S21 rigs to "gain momentum entering the halving."

Last week, Cointelegraph cited a report showing that Canada's Bitfarms mining company has purchased an additional 28,000 Bitmain T21 machines, 3,888 Bitmain S21 machines, and 740 Bitmain S21 machines, increasing the company's total ASICs to 51,908 devices.

According to analysis firm Galaxy, after the 2024 halving, about 20% of ASIC machines on the entire Bitcoin network will stop operating due to insufficient competitiveness. Some mining machines like Bitmain's S9, Canaan's A1066, and MicroBT's M32 will be offline. This is why Bitcoin mining farms need to enhance their new-generation mining rigs to increase competitiveness as the halving approaches.

As the Bitcoin halving draws closer, the race among miners intensifies, driven by the need to adapt to the changing dynamics of the industry. Beyond the immediate challenges posed by the reduction in block rewards, miners are also contending with broader market forces and technological advancements.

One significant aspect of this race is the geographic distribution of mining operations. While China has historically dominated Bitcoin mining due to its abundant and relatively cheap electricity supply, recent regulatory crackdowns and environmental concerns have prompted a shift in mining activities to other regions.

Countries like the United States, Canada, Kazakhstan, and Russia are witnessing a surge in mining operations as companies seek more stable regulatory environments and access to renewable energy sources. This decentralization of mining activities not only reduces the risk of regulatory disruptions but also contributes to the overall resilience and security of the Bitcoin network.

Moreover, the evolution of mining hardware is playing a crucial role in shaping the competitive landscape. Manufacturers like Bitmain, MicroBT, and Canaan are constantly innovating to produce more efficient and powerful mining rigs. The latest generations of ASIC machines offer higher hash rates and lower energy consumption, allowing miners to optimize their operations and maintain profitability in the face of increasing difficulty levels.

In addition to hardware upgrades, miners are exploring alternative revenue streams and business models to diversify their income sources. Some are venturing into cryptocurrency staking, cloud mining services, or even setting up mining pools to leverage economies of scale and reduce operational costs.

Furthermore, the growing interest in sustainable mining practices is driving investment in renewable energy solutions such as solar, wind, and hydroelectric power. By harnessing clean energy sources, miners not only mitigate their environmental footprint but also reduce their reliance on fossil fuels, thereby enhancing their long-term viability and social responsibility.

Overall, the race among Bitcoin miners extends far beyond the simple pursuit of block rewards. It's a multifaceted competition shaped by technological innovation, regulatory dynamics, and environmental considerations. As the industry continues to evolve, miners must remain agile and adaptive to navigate the challenges and seize opportunities in this dynamic landscape.