As the next Bitcoin halving event approaches, mining firms are bracing for significant cost increases. CoinShares has analyzed the impact of the halving and identified the companies best positioned to weather the storm in a recent report. The halving event, scheduled for April 2024, will reduce the block reward given to miners by half, slowing down the rate of new Bitcoin creation. This will likely lead to an increase in the cost of production and cash costs for miners.
CoinShares predicts that the average cost of production and cash costs will increase from approximately $16,800 and $25,000 per Bitcoin in the third quarter of2023 to $27,900 and $37,800, respectively. The analysis suggests that Bitcoin mining firms Riot, TeraWulf, and CleanSpark are best positioned to navigate the halving event due to their cost structure and long runways. However, all miners will face challenges if the Bitcoin price falls below $40,000.
CoinShares points out that while most miners are improving their fleet efficiency, the direct cost structure is not improving since they will need to increase their power draw and energy consumed to mine the same amount of Bitcoin. Electricity costs per Bitcoin pre- and post-halving form about 68% and 71% of miners’ total cost structure, respectively.
The analysis also highlights the challenges faced by Core Scientific, which recently closed an oversubscribed $55-million equity financing round in an effort to return to solvency. Overall, the Bitcoin halving event will likely squeeze miners’ margins, and only the most efficient and well-positioned firms will be able to remain profitable.
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