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Bitcoin Miners Brace for Post-Halving Profit Challenges

Cantor Fitzgerald's analysis reveals the vulnerability of several large miners if the price of BTC.

Fri, 26 Jan 2024, 13:05 pm UTC

According to financial services firm Cantor Fitzgerald analysts, eleven of the largest publicly traded Bitcoin miners may face profitability challenges. Their research suggests that if the price of BTC fails to significantly increase after the halving, these miners could find it difficult to operate profitably.

Implications of a Price Stagnation on Bitcoin Miners

Cointelegraph reported that a Jan. 25 post from CleanSpark executive chairman and co-founder Matthew Shultz, referring to Cantor Fitzgerald's research, highlights the potential pressure on Bitcoin miners post-halving. Marathon Digital, Riot Platforms, and Core Scientific are among the miners that may be affected, as the revenues generated may not cover their operational costs.

ADVFN noted that while Bitcoin miners' revenues are closely tied to the price of Bitcoin, Luxor executives emphasize that miners often employ strategies to hedge against potential losses stemming from price volatility. These strategies involve mitigating the risks associated with Bitcoin's fluctuating value.

Argo Blockchain (ARBK) and Hut 8 mining, based in the United Kingdom and Florida, respectively, are projected as potentially unprofitable after the halving. At the current Bitcoin price, their "all in" cost-per-coin rate is $62,276 and $60,360, respectively. Hut 8 reports a reserve of 9,195 BTC, amounting to $377 million at current prices.

Maintaining Profitability Amidst Challenging Market Conditions

Among the miners assessed by Cantor analysts, Singapore-based Bitdeer and United States mining firm CleanSpark are expected to maintain profitability post-halving. However, this is based on an average Bitcoin price of $40,000 and no significant changes in the hash rate.

Cantor's metric refers to the total costs incurred by Bitcoin miners in producing a single coin. This includes electricity costs, hosting fees, and other cash expenditures necessary for mining operations.

Scheduled for April, the Bitcoin halving will reduce the mining rewards by half. While many market pundits view this reduction as bullish for Bitcoin's long-term price, it also poses challenges for miners with high operational costs. A failure to reach a price level that covers these costs could exacerbate the situation.

Strategies Employed by Bitcoin Miners to Mitigate Risk

Dan Rosen, the associate director of derivatives at Bitcoin miner Luxor, explains that miners often rely on various strategies to hedge their exposure to BTC. This typically involves purchasing derivative products like hash rate futures.

Market commentators speculate that Bitcoin will likely experience a significant price surge in the months following the halving, which may help alleviate the challenges miners face. However, the overall outcome remains uncertain.

Photo: Kanchanara/Unsplash

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