Only the miners with the lowest energy costs and most efficient equipment will survive the once-every-four-years event.
The bitcoin mining hashrate, a measure of computing power on the network, will likely decline dramatically a year from now, once rewards are halved.
Roughly every four years, the reward for successfully mining a bitcoin block is cut in half. This event, known as the halving, reduces inflationary pressure on bitcoin. Currently, rewards are 6.25 BTC per block ($170,000) and in April 2024 they will be reduced to 3.125 BTC per block ($85,000).
Currently, publicly listed miners mine at a cost of $10,000-$15,000 per bitcoin, said Wolfie Zhao, head of research at mining consultancy Blocksbridge. Once the halving happens, these costs will double, bringing miners’ breakeven point to $20,000-$30,000.
“If bitcoin isn’t seriously above $30,000, many of them could be mining at a gross loss,” he said.
Wall Street giant JPMorgan predicted the cost to mine bitcoin could rise as high as $40,000 after the halving.
With such a high cost of mining and absent any significant rally in the price of bitcoin, only the most cost efficient miners will survive, while others will be forced to shut down their operations.
“Energy cost and equipment efficiency will determine winners and losers post halving,” said Kerri Langlais, chief strategy officer at bitcoin miner TeraWulf (WULF).
Operators with higher production costs per bitcoin will have a more difficult time surviving the halving. According to data compiled by Zhao, Stronghold Digital Mining (SDIG), Cipher Mining (CIFR) and Riot Platforms (RIOT) have the lowest costs of production, with Stronghold at $8,200, Cipher at $8,600 and Riot at $10,400 per bitcoin in the first quarter.
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