Riot, TeraWulf and CleanSpark Best Site Miners for Bitcoin Halving – CoinShares
According to an analysis by asset manager CoinShares, Bitcoin mining companies Riot, Terawolf and ClintSpark are the best in the industry to increase the expected cost after the Bitcoin halving event in April.
As a result of the halving, CoinShares predicts that production and financing costs will increase from approximately $16,800 and $25,000 per Bitcoin in the third quarter of 2023 to $27,900 and $37,800 respectively. The average post-halving price of crypto miners is estimated to be $37,856.
The halving cuts the reward to miners in half, thereby slowing down the creation of new bitcoins as part of the network's supply-control price reduction policy. The next halving, which is expected to take place in April 2024, will reduce the Bitcoin block reward to 3.125 BTC. The cost of mining, however, remains the same or may even increase to become profitable as mining expands.
“[…] We think Riot, Terawolf and Cleanspark are in the best position going into the semis. One of the main problems miners face is huge SG&A. [selling, general, and administrative expenses] expenses. For miners to break even, the halving will force them to cut SG&A costs, otherwise they may continue to run at a loss and move to liquidate their HODL balances and other existing assets.
A CoinShares analysis estimates Bitcoin's price at $40,000 post-halving, suggesting that below this point mining companies could “eat into their runways,” meaning miners would end up using financial reserves or operational buffers to stay in business.
In this case, Riot appears to be the best place to explore the semi-event “with their cost structure and long runway.” However, if the price of Bitcoin falls below $40,000, the company will not be immune from challenges.
“Overall, we believe that only Bitfarms, Iris, CleanSpark, TeraWulf and Cormint will continue to be profitable as long as the price of Bitcoin remains above $40,000.”
CoinShares notes that while most miners are improving their fleet efficiency – measuring energy consumption relative to mining production – the direct cost structure is not improving because “they have to increase their energy consumption and their energy consumption by the same amount of Bitcoin.”
According to CoinShares analysis, electricity costs in Bitcoin pre- and post-halving amount to 68% and 71% of the total cost structure of mining.
“The more a miner has to self-mine, the more megawatts the data center needs. This large capital expenditure is backed by cash, equity or debt, of which the overall production value of miners could be affected by high interest costs and put at risk during a Bitcoin downturn,” reads the analysis using Core Scientific. Example.
In an effort to return to solvency, Core Scientific closed an oversubscribed $55-million equity financing round on January 8. The mining company plans to list on the Nasdaq after bankruptcy proceedings are over.
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