Bitcoin miners face economic challenges following April's halving event, which reduced mining rewards and worsened profitability, reports a new JPMorgan analysis.
Historic Quarter for Bitcoin Miners
The second quarter of 2023 marked a historic period for Bitcoin miners. The fourth halving event on April 20 reduced the number of earned coins by half — from 6.25 BTC to 3.125 BTC per 210,000 blocks. Analysts Reginald Smith and Charles Pearce noted that this led to diminished profits and margins across all covered companies.
Different Company Strategies
Companies like Riot Platforms and Cleanspark acquired other firms with turn-key facilities to boost short-term hashrate and enhance their power capabilities. Meanwhile, capital-constrained companies like IREN and Cipher focused on securing growth opportunities requiring less immediate capital.
Reaction to Changes
The number of bitcoins mined by the five publicly-traded mining companies covered by JPMorgan's analysis decreased by 28% from the second to the third quarter of 2023, totaling 5,854 BTC. Marathon Digital Holdings led in the number of bitcoins mined, earning 2,056 BTC. CleanSpark increased its market share by investing $231 million in capital expenditures in Q2. Post-halving, some companies started reallocating computational power from BTC mining to artificial intelligence applications. For instance, Hive Digital Technologies Ltd. recorded a 36% increase in sales in the second quarter of 2024 after diversifying into AI applications.
The halving event and rising power costs have significantly impacted Bitcoin miners' profitability, requiring companies to adapt to new conditions and develop different strategies to maintain profitability.
Comments