Bitcoin Halving Can Cost Crypto Miners $10 Billion In Losses

Highlights

Bitcoin halving will major increase the miners' expenses in terms of equipment and energy costs.
Traders are speculating on decline of crypto mining stock with $2 billion in short positions.
Private miners continue to face challenges in terms of raising capital for expansion.

Everyone is eagerly awaiting the upcoming Bitcoin halving event next week, which will create a supply shock in the market and thus Bitcoin price higher. However, for crypto miners, it could pose an uphill challenge triggering a multi-billion dollar decline in revenue.

Bitcoin Miners Stare At $10 Billion In Losses

Around April 20, the Bitcoin halving event will halve the daily rewards for miners from 900 to 450 Bitcoins. This reduction in rewards could result in revenue losses of approximately $10 billion annually for the entire mining industry, considering Bitcoin’s current price.

To mitigate this potential loss, companies like Marathon Digital Holdings Inc. and CleanSpark Inc., along with other miners, are investing in new mining equipment and acquiring smaller competitors. These efforts aim to offset the expected decline in revenue caused by the halving event. Speaking on the development, Matthew Kimmell, a digital asset analyst at CoinShares, said:

“This is the final push for miners to squeeze out as much revenue as they can before their production takes a big hit. With revenues across the board decreasing overnight, the strategic response of each miner, and how they adapt, could well determine who comes out ahead and who gets left behind.”

Historically, Bitcoin has always given massive returns after the previous Bitcoin halving events. This has majorly resulted in offsetting the drop in mining rewards and the surge in operational expenses. However, one area where the mining industry faces a challenge is that they continuously need to increase their expenditure in this technological competition despite the dropping rewards.

Bitcoin Halving – A Bane or Boon?

The surging value of Bitcoin has effectively mitigated these energy expenses and propelled the expansion of cryptocurrency mining operations. Since the introduction of specialized mining equipment in 2013, the combined market capitalization of 14 miners listed on U.S. exchanges has surged to approximately $20 billion, as per a report from JPMorgan Chase & Co. issued on April 1.

While publicly-listed miners in the U.S. are prominently featured in the industry, they only represent roughly 20% of the sector’s overall computing power, according to findings from crypto research firm TheMinerMag. The remainder is attributed to private miners, who may face greater vulnerability following the halving. Private miners often rely on debt financing or venture capital to meet their operational requirements, whereas public companies have the option to raise capital through share offerings.

With anticipation building around the event, certain traders are wagering on the decline of mining stocks. As of April 11, the total short interest, representing the dollar value of shares borrowed and sold by bearish traders, reached approximately $2 billion, according to an estimate by S3 Partners LLC. This short interest comprises nearly 15% of the group’s outstanding shares, a figure three times higher than the U.S. average of 4.75%, noted Ihor Dusaniwsky, managing director of predictive analytics at S3.

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Bhushan Akolkar

Bhushan is a seasoned crypto writer with over eight years of experience spanning more than 10,000 contributions across multiple platforms like CoinGape, CoinSpeaker, Bitcoinist, Crypto News Flash, and others. Being a Fintech enthusiast, he loves reporting across Crypto, Blockchain, DeFi, Global Macros with a keen understanding in financial markets.   He is committed to continuous learning and stays motivated by sharing the knowledge he acquires. In his free time, Bhushan enjoys reading thriller fiction novels and occasionally explores his culinary skills. Bhushan has a bachelors degree in electronics engineering, however, his interest in finance and economics drives him to crypto and blockchain.

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