As the halving fast approaches, what’s next for Bitcoin miners?

With Bitcoin’s latest halving estimated to occur around 8:30 p.m. ET today, we asked several firms in the industry what impact it will have on miners in the cycle ahead as their block subsidy reward gets cut from 6.25 BTC to 3.125 BTC.

Ultimately, perhaps CleanSpark Chief Communications Officer Isaac Holyoak put it best.

“This halving will be much like the season it accompanies: in like a lion and out like a lamb. Then, the wolves,” Holyoak told The Block. “What do I mean by that? There is a lot of excitement around halving. But in terms of practical impacts? That will take months. It’ll be a war of attrition as less efficient miners hold on as long as they can. Then comes M&A.”

Why this time is different

Setting the scene, Brian Wright, Galaxy’s Co-Head of Mining, explained that while Bitcoin’s last halving in May 2020 occurred prior to significant price appreciation — with miners already operating near marginal profitability as bitcoin recovered from a COVID-related crash two months prior — this time round is a very different picture.

“Bitcoin price is up ~120% over the last six months, and many miners have reported marginal production costs of around $20,000/BTC. There are fewer miners that will need to immediately halt operations following the halving this month,” Wright said.

However, “miners will be less profitable, forcing greater scrutiny over discretionary costs that could help mitigate some of the immediate decline in revenue,” he added. “I expect differentiation based on power strategy and cost-to-mine as miners prioritize maximizing margins vs. top-line growth.”

Bitcoin infrastructure firm Blockstream’s Head of Business Development Adolfo Contreras said that having gone through three halvings already, established miners should be well-prepared for this one — providing they’ve secured sufficient financing and liquidity to offset the reduced rewards.

“Notably, this is the first halving preceded by a significant price increase, which has likely improved liquidity planning for all involved,” he said.

Surviving in an increasingly competitive market

Bitcoin mining difficulty — measuring how hard it is to mine a new block — rose 3.9% last week to hit a new all-time high in the final adjustment ahead of the halving as miners appeared to ramp up their hash rate in preparation for the block subsidy reward drop.

Bitcoin mining difficulty and hash rate have trended up since the beginning of the year. However, Bitcoin miner Marathon Digital’s VP of Corporate Communications Charlie Schumacher suggested the industry essentially navigated a halving already last year.

“One thing I feel like the market forgets is that we essentially went through a halving event last year,” Schumacher said. “In 2023, Bitcoin’s difficulty rate doubled. The industry still performed quite well. The large miners, like Marathon, have been preparing for the halving event for years. If anything, I think you’ll see hash rate continue to climb as miners swap out old machines for newer more efficient equipment.”

While miner revenues have also risen this year amid the increase in bitcoin’s price, the extent of the impact the halving has on less efficient mining operations and, hence, the overall network metrics following the drop in subsidy remains to be seen.

Greg Beard, CEO of Stronghold Digital Mining told The Block that there were many concerns within the industry about the “excessive” number of publicly traded miners, but he expects the sector to trend toward consolidation over the course of this year.

“Miners whose only leveler is to acquire more efficient machines to stay competitive will find themselves at a disadvantage, as this option isn’t sustainable in the long term,” Beard said. “On the other hand, miners who own their low-cost power are better positioned to thrive in the post-halving environment, as their operational costs will be lower, allowing them to be more flexible with their capital.”

Charles Chong, Director of Strategy at Bitcoin mining firm Foundry, said the industry used to favor the bold when bitcoin was still an unproven asset class, and there were many risks involved in bitcoin mining on the market and regulatory front.

“However, as the sector evolves, the halving is catalyzing a shift towards more efficient operations and judicious capital deployment. While the prospect of revenues halving overnight every four years is unparalleled in other sectors, the predictable nature of these events allows for strategic preparation. Overall, the halving necessitates a refinement in operations, which could be construed as bullish in the long term by fostering a more resilient and efficient mining…