As the crypto landscape rapidly evolves, Bitcoin miners are ramping up their operations to keep up with the increasing demand and take advantage of the cryptocurrency’s soaring hash rate. According to a recent research report by brokerage firm Bernstein, the 16 largest publicly listed mining companies now account for an impressive 16% of total BTC mined. The report reveals that these mining giants collectively boast a mining capacity of 72 exahashes per second (EH/s), with plans to increase it by a staggering 182% over the next 2-3 years.
However, the report also points out that larger miners with low production costs and minimal debt will likely be the primary beneficiaries of this capacity expansion. These miners will have a greater ability to withstand Bitcoin’s price volatility and any potential cost spikes resulting from the upcoming Bitcoin halving in Q1 2024. Gautam Chhugani, lead analyst at Bernstein, emphasized this, stating, “Lower the cost of production, better the miner positioning for the bitcoin halving impact.”
The current market price of Bitcoin stands at around $30,000, and interestingly, 15 of the analyzed companies boast production costs below $15,000 per BTC. However, with the upcoming halving, which will double the cost of production, some miners could face challenges breaking even if there is no price increase from the current levels.
Despite this, the research report highlights that the crypto market’s positive momentum, potentially spurred by Bitcoin exchange-traded-fund (ETF) approvals and increased institutional participation, could provide miners with the much-needed “margin room” for the 2024 halving event.
One significant factor affecting miners’ capabilities to weather price fluctuations is their debt-to-equity ratio. Three of the analyzed mining companies have a ratio of more than 1, which reduces their ability to withstand a prolonged period of depressed Bitcoin prices.
In a strategic move to navigate price uncertainties and maximize profits, four mining firms, namely Riot (RIOT), Marathon Digital (MARA), Hut 8 (HUT), and Hive Digital (HIVE), have opted to hold Bitcoin on their balance sheets. This approach allows them to wait for higher prices before selling their mined crypto, thereby increasing realized gains on their holdings.
Amidst these remarkable developments, the crypto market has experienced significant turbulence in recent times. However, the hash rate, which represents the computational power dedicated to mining, has remarkably surged by an astounding 661% over the last two years. This growth is a testament to the relentless efforts of miners to adapt and capitalize on the booming interest in cryptocurrencies.
Beyond the mining sphere, Bitcoin has also been the subject of regulatory attention. The Biden administration in the USA recently imposed a 30% tax on crypto mining operations due to concerns over energy consumption. However, this move has been met with opposition from influential figures such as Presidential candidate Rober F Kennedy and Senator Cynthia Lummis, who believe that targeted regulations should be favored over blanket measures that hinder technological progress.