☕ Following the halving event, Bitcoin miners' breakeven point increased from $23,000 to $43,000 USD, prompting them to explore various ways to stay afloat.
Bitcoin mining is an energy-intensive process. Miners use specialized computers to validate transactions, create new blocks, and earn rewards in Bitcoin (BTC). However, the blockchain algorithm is designed so that every 210,000 new blocks created, the mining rewards halve. This algorithm is known as Bitcoin halving.
It is estimated that this Bitcoin halving event will occur 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 their strategies to stay profitable.
Challenges for miners
Data from BTC.com shows that Bitcoin mining difficulty has continuously reached new highs recently. In the cryptocurrency space, hashrate, also known as the hash rate, represents 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 hashrate reached a historical high of 83.95 exahashes per second (EH/s), a 5.8% increase from the previous peak on February 29th at 79.35 EH/s. BTC.com forecasts indicate that the difficulty will continue to rise to 84.17 EH/s by March 27th.
According to Cointelegraph, the increasing hashrate implies intensified competition among miners. Small miners with weak setups cannot compete at this difficulty level, forcing them to exit the network. Meanwhile, large mining farms also have to invest in new equipment to maintain their advantage. Additionally, there's increasing pressure on electricity costs, the input cost for mining new Bitcoins.
However, the upcoming halving event in April poses the biggest challenge. Fred Thiel, CEO of Marathon, one of the largest Bitcoin mining companies in the United States, told Bloomberg: "After 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 per mined Bitcoin, it will increase to about $43,000 after halving."
Apart from investing in specialized mining equipment, miners have to balance costs related to electricity, storage, and various other expenses. In late January, research firm Cantor Fitzgerald indicated that at least 11 out of 13 of the largest Bitcoin mining farms are "at risk" after halving.
The race to prepare for halving
According to Bloomberg, besides smaller miners struggling to balance profitability, large mining farms are frantically racing to expand their operations to offset sudden profit declines after halving.
CEO Fred Thiel mentioned that instead of relying solely on external power sources, Marathon has acquired additional large-scale power plants to proactively balance costs. On March 14th, the company purchased a 200-megawatt power plant in Texas for over $87 million. Several months earlier, they also spent $179 million 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% in three months.
Fred Thiel stated: "We will continue to stay in the Bitcoin mining industry. To balance the breakeven point, we need to control mining costs, primarily electricity. In the long run, a stable energy supply will ensure that we maintain a competitive edge over rivals."
While some large mining farms seek to reduce electricity costs, others are actively investing in additional specialized equipment. A spokesperson for Core Scientific, one of the largest Bitcoin mining companies in the US, stated that they've acquired the latest Bitcoin S21 machines to "build momentum going into halving."
Last week, Cointelegraph reported that Canadian mining company Bitfarms had purchased an additional 28,000 Bitmain T21 machines, 3,888 Bitmain S21 machines, and 740 Bitmain S21 machines, bringing the company's total ASIC count to 51,908 devices.
According to Galaxy analysts, after the 2024 halving, about 20% of ASIC machines on the Bitcoin network will become inactive due to insufficient competitiveness. Some mining machines like Bitmain's S9, Canaan's A1066, and MicroBT's M32 will go offline. This is why Bitcoin mining farms must strengthen their new generation mining rigs to enhance competitiveness as halving approaches.
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