CoinShares has, in its latest statement, estimated the cost incurred to produce Bitcoin to average $37,856 post-halving. The publication hails Riot Blockchain, CleanSpark, and TeraWulf for their readiness to handle the spike in mining costs after the April halving event.
The Analysis completed by the asset manager CoinShares predicts the production and cash costs to surge from $16,800 and $25,000 incurred in 2023’s third quarter to test $27,900 and $37.800, respectively. As such, the production cost for miners after the Bitcoin halving will rise to $37,856.
Riot Leads CleanSpark and TeraWulf in Readiness to Overcome Rising Production Cost
The halving event is set to reduce the reward that miners realize per every block completed. It is projected to slow down the Bitcoin creation rate aligned to the network supply controls and the deflationary policy.
The next halving will occur in April 2024 to lower the Bitcoin block reward to 3.125 bitcoin. The mining cost is set to remain the same and even increase owing to miners’ expanding operations in pursuit of profitability.
CoinShares analysis indicates that Riot, CleanSpark, and TeraWulf are positioned to overcome high expenditures related to administrative, selling, and general (SGA) costs. The asset manager indicates miners should prioritize minimizing operating costs to break even. Failure to cut the expenses would compel miners into liquidating the current assets and HODL balances.
Loss Looming If Bitcoin Slips Below $40,000
CoinShare Analysis considers a price level of $40,000 as the base level after the halving event. A downtrend below the $40,000 base price would imply that firms are eating into the runway.
The process would imply that miners would utilize financial reserves and operational buffers to sustain business. CoinShares reports that Riot is the best-positioned crypto miner to navigate the post-halving event owing to its cost structure and extended runway. Nonetheless, the crypto miner is not immune to the challenges if the Bitcoin price slips below $40,000.
CoinShares illustrates that Cormint, Terawulf, Iris, CleanSpark, and Bitfarms are the only crypto miners to sustain profitable operations if the Bitcoin price declines below $40,000.
CoinShares highlights that most miners are devoted to optimizing their fleet efficiency. They track energy consumption relative to the mining output. Such is necessary since the direct cost structure cannot improve considering more power draw and energy consumption to realize a similar Bitcoin amount.
CoinShares’ publication demonstrates that the electricity costs will rise from 68% of the Bitcoin pre-halving to 71% of the firm’s total cost structure post-halving.
CoinShares Warns Miners Against Unchecked Debt Financing
CoinShares analysis utilizes the Core Scientific illustration that firms running more rigs for self-mining require larger data centers on a megawatt basis. Cash, debt, and equity financing meet the larger capital expenditure.
Debt issuance will likely hurt the crypto miners’ production cost as the larger data center translates to higher interest expenses. It places the miners on the verge of struggles to sustain business, as witnessed in the Core Scientific case during the Bitcoin downturns.
CoinShares observes that Core Scientific is advancing in its efforts to overcome insolvency. Its return to solvency surfaced in the equity financing round, which concluded on January 8. The crypto miner declared the $55 million equity financing oversubscribed as the firm eyes relisting on Nasdaq upon completing the bankruptcy proceedings.
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