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Bitcoin miners’ profitability is up for a challenge, with an analysis by Seeking Alpha predicting a grim future unless BTC prices escalate to around the $100,000 mark and stay there. Notably, mining farms, particularly publicly traded ones in the United States such as Riot and Marathon, find themselves at a significant crossroad. Any alteration in hash rate, difficulty level, or electricity costs amid limited BTC availability may spell change.
Notably, in 2023, the stocks of Bitcoin mining have outperformed Bitcoin itself. Despite Bitcoin prices hovering around $31,800 by the end of the first half of 2023, the shares of prominent mining farms like Riot and Marathon Digital have seen a two-fold increase over the last few months.
Typically, a close correlation exists between the performance of crypto mining stocks and Bitcoin’s performance in the secondary market. As Bitcoin prices surge, crypto mining stocks follow suit and vice versa. However, 2023 has seen a break in this pattern, with a noticeable divergence in the performance of crypto miner stocks and Bitcoin prices.
As the anticipated halving event looms closer, set to slash miners’ rewards in half, concerns regarding the required Bitcoin price for miners to maintain profitability are on the rise. The Seeking Alpha report implies a daunting future, where Bitcoin prices must surge beyond $100,000 for mining farms to remain viable.
The report underlines the risks of Bitcoin mining, particularly the upcoming halving event that would significantly dent the miners’ revenue by halving block rewards.
If Bitcoin prices stick around current levels, mining companies like Riot Platforms may resort to issuing new shares to raise necessary funds. However, this strategy could lead to share dilution and subsequently drive share prices down.
Further complications arise from predictions around the Bitcoin network’s hash rate, an indicator of the computing power. Experts suggest a potential fall of up to 30% post-halving. Despite the network’s supply economics being adjusted with each halving, miners will face increasing pressures to expend the same input for verifying the same blocks.