As the next Bitcoin halving event approaches, mining companies are bracing for significant cost increases. CoinShares analyzed the impact of the halving and identified the companies best able 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 the rate of new bitcoin creation. This is likely to lead to an increase in the cost of production and cash costs for miners.
CoinShares expects that average production costs and cash costs will rise from approximately $16,800 and $25,000 per bitcoin in the third quarter of 2023 to $27,900 and $37,800, respectively. The analysis suggests that bitcoin miners Riot, TeraWulf, and CleanSpark are better positioned to navigate the halving event due to their cost structures and longer runways. However, all miners will face challenges if the price of Bitcoin drops below $40,000.
CoinShares points out that while most miners are improving the efficiency of their fleet, their direct cost structure is not improving because they would need to increase the power draw and energy consumed to mine the same amount of Bitcoin. Electricity costs per Bitcoin before and after the halving constitute about 68% and 71% of the total cost structure of miners, respectively.
The analysis also highlights the challenges facing Core Scientific, which recently closed an oversubscribed $55 million equity financing round in an attempt to return to solvency. Overall, a Bitcoin halving event will likely put pressure on miners’ margins, and only the most efficient and well-positioned companies will be able to remain profitable.
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