A range of challenges will essentially drive some Bitcoin miners out of the market, according to Fred Thiel, chief executive officer of Marathon Digital Holdings Inc., one of the biggest US-based participants in the sector.
(Bloomberg) — A range of challenges will essentially drive some Bitcoin miners out of the market, according to Fred Thiel, chief executive officer of Marathon Digital Holdings Inc., one of the biggest US-based participants in the sector.
Stagnant Bitcoin prices, high power costs, persistent competition along with a preprogrammed event that cuts mining reward in half have compressed miners margins and prompted them to make their power-hungry operations more efficient, Thiel said during an interview on Bloomberg Television.
“The larger miners that have the most modern fleets, the best energy costs and the most efficient are going to thrive while the smaller miners that either can’t raise capital, can’t upgrade their machines and can’t get out of essentially more expensive energy contracts are either going to consolidate or essentially going away,” Thiel said Tuesday.
Bitcoin miners is enjoying respite amid a rebound in Bitcoin prices this year after a plunge in digital assets in 2022 due to a flurry of crypto meltdowns that included bankruptcies by firms such as Core Scientific Inc. Even so, increasing competition among miners have offset some of that recovery.
The mining difficulty, a measure of computing power to mine Bitcoin, hit a record high in the latest biweekly update as mining companies keep deploying new machines to be more efficient.
Margins are essentially staying flat to a little bit lower because of the the difficulty increases, but the current Bitcoin price of around $26,000 is moving to the right direction, Thiel said. Bitcoin traded at around $16,500 at the end of last year.
The crypto-mining companies are also set to face a drastic drop in revenue as the Bitcoin blockchain is preprogrammed to hit its 21 million cap in 2140 and reduce new coin issuance to reward miners in half every four years. The mining reward has been the main source of revenue for Bitcoin miners.
“At that point, there is a big impact on the margins because cost to mine will essentially double,” Thiel said. “There will be some sort of cleansing post halving next year.”
Shares of Las Vegas-based Marathon rose about 4% to $9.72 as of 3:33 p.m. in New York, bringing the gain for the year to more than 180%. Marathon traded as high as $83 in November 2021, when Bitcoin reached a record of almost $69,000.
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