The recent Bitcoin halving event has significantly impacted the revenue of miners, with the block subsidy dropping from 6.25 BTC to 3.125 BTC. While miners initially saw a boost in profitability from transaction fees, this surge has since dwindled, leading to a decline in mining profitability. Hashprice, a measure used by miners to assess earnings potential, hit an all-time low post-halving.
Publicly traded Bitcoin miners are now facing economic pressures due to the reduced block subsidy. By analyzing the operating costs of these companies and comparing them to hashprice, one can see the compressed margins. Companies like Cleanspark, Riot, and Core Scientific have the largest gross mining margins post-halving, while others like Marathon, Hive, and Hut 8 have smaller percentage margins.
Despite appearing to have the strongest margins, some companies like Core Scientific have underlying financial issues. Core Scientific declared Chapter 11 bankruptcy in 2022 and has the largest debt among competitors. Miners like Hive and Hut 8 are teetering on the edge of unprofitability, with thin profit margins due to high power costs and inefficient fleets.
Expansions will be crucial for miners to stay ahead of the competition. Companies like Riot, Bitfarms, and Cleanspark have significant ASIC orders outstanding and are investing in expanding fleet and power capabilities. Riot is building a new facility with immersion cooling technology, while Bitfarms has opened a $375 million offering to fund its expansion. Cleanspark has acquired new sites and is utilizing an at-the-market offering to improve fleet efficiency.
Investors are advised to stick to miners with proven track records of expansion and efficiency. Companies like Cleanspark, Riot, and Marathon have used liquidity from 2023 to expand their operations. Others like Terawulf, Cipher, and Iris have also made strides in the right direction. Miners with clear strategies to lower operating costs, such as deploying energy-efficient ASICs or utilizing power trading strategies, will be in a better position in the coming years.
The clear goal for miners moving forward is efficiency and cost-cutting. Companies that can lower operating costs and expand their operations will be in a better position to thrive in the evolving Bitcoin mining landscape. Bitfarms, in particular, has the potential to increase its profit margins through planned expansions and could catch up with industry leaders like Riot, Marathon, and Cleanspark in terms of valuation if these expansions are successful. Overall, navigating the current challenges in the mining sector will require a strategic focus on efficiency and expansion.
