Bitcoin Miners Shifting Strategies After Halving
Following Bitcoin's most recent halving in April 2024, the block reward was reduced from 6.25 BTC to 3.125 BTC. This supply reduction is part of a system designed to prolong the mining of the last Bitcoin until 2140, creating a deflationary effect on the asset. Historically, Bitcoin’s price has surged after each halving, but miners now face a critical decision: adopt artificial intelligence (AI) or continue holding onto their BTC.
After the halving, larger mining companies are expected to opt for holding BTC, anticipating its value to rise over time. On the other hand, some smaller companies are looking to integrate AI into their operations to optimize revenue streams.
Post-Halving Strategy for Bitcoin Miners
Bitcoin miners often face mixed feelings following a halving event. The immediate impact on their revenue and mining profitability, as rewards are cut in half, significantly affects their earnings.
In response, many miners attempt to optimize operational costs, especially electricity expenses, by acquiring more energy-efficient mining rigs or utilizing renewable energy sources.
With the belief that Bitcoin’s price will rise within 6-18 months after the halving, many miners remain committed to the asset. However, smaller and less efficient miners may be forced to exit the market. Meanwhile, larger players are expanding their capacities, hoping to clear the competition. As more miners leave the network, mining difficulty decreases, allowing remaining miners to accumulate more BTC in the short term.
Some miners adopt a strategy of holding reserves and selling during future price surges. Experienced miners also hedge their revenue losses by using financial instruments like futures contracts and derivatives.
Big Players Stay the Course
Major mining companies like MARA Holdings, Riot Platforms, and CleanSpark are betting on BTC’s long-term value increase. According to Bitcoin Treasuries, MARA holds 26,000 BTC, and Riot Platforms holds 10,000 BTC.
Wolfie Zhao, an analyst from research firm TheMinerMag, shared his thoughts on the current position of Bitcoin miners:
“By avoiding the immediate, albeit unprofitable, sale of their Bitcoin reserves, these companies are positioning themselves for potential profits when the bull market arrives. It’s a strategic decision, but not everyone can afford to wait.”
Choosing AI Over Bitcoin
A significant portion of Bitcoin miners, particularly those with experience in financial markets, are now turning to AI investments. After the spring halving, several miners with stock trading backgrounds have shifted their focus to AI for higher returns.
Core Scientific’s stock price has quadrupled since announcing a multi-billion-dollar deal with the AI startup CoreWeave. This restructuring was necessary to avoid bankruptcy earlier this year. The company’s stock, listed on the Nasdaq, currently trades at $12.81.
Meanwhile, MARA and Riot’s shares have declined by 20% and 34%, respectively. Other companies like Iris Energy and Bit Digital, which have focused on AI investments and acquisitions, are performing better than MARA and Riot.
Ethan Vera, COO of Luxor Technology, commented on the differing strategies:
“In a rising market, holding onto BTC can be a highly profitable strategy, but it comes with significant risk. If BTC’s price starts to fall, losses can pile up. The lack of operational profitability will reflect in stock prices, which companies may try to offset by purchasing new machines, but to no avail.”