Miners’ Preparations for Next Bitcoin Halving

Miners' Preparations for Next Bitcoin Halving

Preparing for the Next Bitcoin Halving: Insights from the Blockchain Industry

As Bitcoin’s halving date approaches, miners are diligently researching and planning their strategies. By studying the effects of previous halvings on the Bitcoin network and analyzing market reactions during those times, miners aim to understand potential challenges and opportunities that may arise. The fourth Bitcoin halving is expected to occur on April 16, 2024, reducing block rewards from 6.25 bitcoin to 3.125 bitcoin per block.

Upgrading to an Efficient Mining Fleet

To mitigate the double energy costs associated with mining a single bitcoin, miners are focusing on upgrading their mining hardware and software. Many North American Bitcoin miners have made substantial purchases of the most efficient miners available on the market in preparation for the forthcoming halving. For example:

  • Marathon Digital (MARA) acquired 78,000 units of Antminer S19 XP mining machines, known for their efficiency, providing close to 11 EH/s in hash rate. By mid-2023, their operational hash rate in North America will reach 23 EH/s.
  • CleanSpark (CLSK) announced a purchase of 45,000 Antminer S19 XP mining machines, expected to provide an additional 6.3 EH/s of hash rate growth by the end of 2022.
  • Riot Platforms (RIOT) purchased 33,280 next-generation Bitcoin miners from MicroBT, increasing their self-mining capacity to 20.1 EH/s upon full deployment in 2024.

Having control over the sites where mining machines are installed is crucial as it allows miners to effectively manage when machines need to be switched on or off.

Leveraging Cheap Sustainable Renewable Energy

Energy represents the largest cost incurred in Bitcoin mining, and as it continuously doubles with each halving, miners must access the cheapest sustainable and renewable energy sources available. Miners without fixed-price energy contracts need the flexibility to curtail their energy use when prices rise and become unprofitable.

CleanSpark (CLSK), for instance, is developing automation that maximizes uptime and firmware allowing them to underclock and overclock as needed. Managing power strategy in Georgia (GA) positions them favorably for the halving. In Texas, miners have found revenue-increasing opportunities through energy strategies. Riot Platforms actively participates in the Electric Reliability Council of Texas (ERCOT) market, supplying power as needed and switching off their systems to balance the grid. Long-term power purchase agreements allow them to maintain low mining costs.

Building Cash Reserves

The previous halving cycles have shown that Bitcoin’s price does not immediately increase after the halving, requiring miners to build cash reserves. During the 2020 halving, it took close to five months for the price of Bitcoin to gain upward traction. By building sufficient cash runway, miners can cover the immediate loss in revenues.

Diversification of Revenue Streams

To optimize their operations and address potential risks associated with the halving, several Bitcoin miners have diversified their businesses and incorporated additional revenue streams. For example:

  • Hut 8 (HUT) acquired the cloud and colocation data center business from TeraGo Inc., establishing itself as a leading high-performance computing platform.
  • Hive Digital Technologies (HIVE) and Iris Energy (IREN) are diversifying into high-performance computing, cloud, and artificial intelligence services.

Exploring Hedging Techniques

In anticipation of electricity cost and hash rate risks, some companies offer hedging services to mining companies. These techniques provide an opportunity for miners to mitigate potential risks before the halving.

Summary

Preparing for the next halving involves upgrading mining fleets, leveraging cheap sustainable renewable energy, building cash reserves, diversifying revenue streams, and exploring hedging techniques. By understanding the challenges and opportunities presented by previous halvings, miners can position themselves effectively for the future. However, if the bitcoin price increases significantly before the halving, some of these preparations may become less critical. To explore more insights on how miners are preparing for the halving, check out the recent article by Compass Mining titled “How miners are preparing for the halving”.

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