Early Morning of the 20th KST
Bitcoin Mining Reward
Halving Applied
Mining Difficulty Increases
AI Industry and Power Competition
Mining Industry 'Separating Wheat from Chaff'
With the Bitcoin halving just five days away, the mining industry is expected to face losses of around 14 trillion won, making a process of 'separating the wheat from the chaff' inevitable. This is because the mining difficulty is increasing, requiring more spending on core infrastructure such as high-speed computers and electricity. The Bitcoin halving, which cuts mining rewards in half, is expected to take effect in the early hours of the 20th, Korea Standard Time.
On the 14th (local time), Bloomberg reported that "the entire mining industry is expected to incur an annual loss of about $10 billion (14 trillion won) due to the Bitcoin halving." This fourth halving, occurring for the first time in over four years since May 2020, will reduce the Bitcoin block reward from 6.25 to 3.125 coins.
As a result of this halving, mining companies will see their profits cut in half. The industry has been mining Bitcoin by solving mathematical calculations using high-speed computers that consume enormous amounts of electricity. As the supply decreases, mining becomes more difficult, inevitably increasing the amount invested in mining infrastructure. According to Bitisi.com, mining difficulty has increased about sixfold since the 2020 halving.
Bloomberg added that a bigger issue is that the mining industry is now facing competition with the rapidly growing artificial intelligence (AI) sector for electricity resources. Major big tech companies such as Amazon, Google, and Microsoft (MS) are pouring huge amounts of money into AI development, while Blackstone, the world's largest private equity firm, is planning to build data centers worth $25 billion.
Adam Sullivan, CEO of Bitcoin mining company Core Scientific, stated, "As a result, cryptocurrency miners are finding it increasingly difficult to secure electricity at favorable prices." David Foley, co-partner of the Bitcoin Opportunity Fund, said, "AI company competitors are willing to pay three to four times the electricity rates that Bitcoin miners paid last year."
The market sees further adjustments in mining-related stocks as inevitable. The stock prices of leading mining companies Marathon Digital Holdings and Riot Platforms have already nearly halved from their peaks in February.
The future surge in Bitcoin prices is expected to be a key indicator of the mining industry's sustainability. So far, Bitcoin prices have tended to rise following halving events. However, given the risks of escalation in the Middle East and the continuous postponement of the U.S. Federal Reserve's (Fed) interest rate cuts, there are counterarguments that Bitcoin prices may actually decline.
Matthew Kimmel, digital asset analyst at UK-based digital asset management firm CoinShares, observed, "Mining companies with low cash flow and no access to borrowing will have to raise operating funds through private equity, etc. If expectations for future mining profits are low, they will be forced out of the market."
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