According to CoinShares, the average production cost for crypto miners after halving will be nearly $37,856 for every Bitcoin.
CoinShares, an asset manager, claims that TeraWulf, Riot, and CleanSpark are three Bitcoin mining companies in the industry’s best position to deal with the considerable cost rises anticipated after the Bitcoin halving event in April.
Crypto Miners Prepare For Upcoming Bitcoin Halving
Due to the event, CoinShares forecasts that production and cash costs will considerably rise from nearly $16,800 and $25,000 for every Bitcoin in the third quarter of last year to $27,900 and $37800, respectively. Further, the average production cost after the halving for crypto miners is anticipated to be $37856.
The halving minimizes the block reward offered to miners by 50%. This reduces the rate of creating new Bitcoin as part of the network supply depreciation strategy. The next halving will happen in April this year and will minimize the Bitcoin block reward to 3125 BTC.
Nevertheless, the mining cost remains constant or might even rise owing to miners’ expansion of operations to maintain profitability. CoinShares believes that TeraWulf, Riot, and CleanSpark are in the most suitable positions moving to the halving. (Selling, general, and administrative) costs is a significant issue faced by miners.
Significance of 2024 Bitcoin Halving
For the firms to break even, the halving might compel them to reduce the costs. If not, they might continue running at an operating loss and be forced to liquidate their HODL balances and other present assets.
According to CoinShares analysis, it is assumed that the price of Bitcoin after halving will be $40000. It noted that mining companies might ‘eat into their runway below this point.’ This means that miners might be compelled to utilize operational buffers or financial reserves to stay in business.
In this case, Riot seems to be in the best position to traverse the halving event ‘because of their long runway and cost model.’
Nevertheless, the firm is not safeguarded from problems in case the price of Bitcoin plummets to less than $40000. Unless Bitcoin’s price stays above $40000, it is believed that only Iris, Bitfarms, TeraWulf, and CleanSpark will maintain profitability.
Bitcoin Miners Seeks to Maximize Returns
CoinShares notes that despite most miners enhancing their fleet efficacy, which entails evaluating energy use against mining output, no improvement is seen in the direct cost structure. This is because they ‘are required to boost their power draw and energy utilized in mining the same Bitcoin amount.’
CoinShares’ analysis shows that the cost of electricity per Bitcoin before and after the having account for nearly 68% and 70% of miners’ overall cost structure. The higher the number of rigs a miner owns for self-mining, the bigger the data centre required on a megawatt basis.
This significant capital expenditure is financed using cash or equity/debt. Using Core Scientific as an example, the analysis showed that equity/debt can affect miners’ ‘all-in production costs because of higher interest expenditure and placing them at risk during Bitcoin slumps.’
On January 8, Core Scientific closed an oversubscribed $55M equity financing round in a bid to get back to solvency. The mining firm aims to relist on Nasdaq after completing insolvency proceedings.
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