After Bitcoin's Fourth Halving... Mining Difficulty Hits Record High of 93 Trillion

Profitability Decline of Mining Companies

In April this year, the fourth-ever Bitcoin halving event caused the mining difficulty to reach an all-time high recently. As a result, there is an analysis that the profitability of the mining industry is deteriorating.

On the 11th (local time), according to cryptocurrency mining information company CoinWars, the Bitcoin mining difficulty index rose 3.5% from the previous week to 9,267.16 trillion KRW, marking an all-time high. Bloomberg analyzed that this was due to the Bitcoin halving applied in April. The halving means that the mining reward is reduced to half when the same resources are invested, and Bitcoin is designed to apply this every four years.

Bitcoin halving tends to act as a factor for price increase in the long term because the mining volume decreases, but in the short term, it puts downward pressure on the price. Since the Bitcoin mining difficulty is rising sharply, mining companies need to sell the Bitcoins they hold to cover the infrastructure costs required for mining.

The price of Bitcoin, boosted by institutional investment inflows following the US securities authorities' approval of Bitcoin spot exchange-traded funds (ETFs) earlier this year, surpassed $73,000 in March but has since fallen by more than 20%.

As a result, the mining industry is struggling. The stocks of Marathon Digital and Riot Platforms, considered leading US mining companies, have plummeted 31% and 54% respectively since the beginning of the year. Christopher Bendiksen of cryptocurrency asset management firm CoinShares said, "As mining difficulty rises to an extreme level, the business outlook for many mining companies is becoming bleak," expressing concern that "some may find it difficult to generate even cash flow, let alone profits."

He added, "Many mining companies expect a sharp rise in Bitcoin prices," and said, "If such a surge does not occur, some companies will face problems."

Meanwhile, some mining companies are expanding their business areas to AI data centers, where demand has surged due to competition in artificial intelligence (AI) technology, as mining profitability worsens. Since mining companies have mining equipment specialized for inference and other tasks, the entry barrier to the data center business is relatively low. Core Scientific, Bit Digital, and Aris Energy are pursuing AI data center businesses this year and generating profitability.