Publicly traded Bitcoin (BTC) miners are experiencing a boom in market capitalization, according to Farside data. Their combined value is nearing a significant milestone of $40 billion, doubling in just seven months. This surge coincides with Bitcoin’s price skyrocketing to record highs, with the cryptocurrency briefly touching the six-figure mark for the first time.
However, miners face a key challenge: revenue. The block reward, which miners receive for confirming transactions on the Bitcoin blockchain, experienced a 50% reduction in April. At the time, their combined market cap was around $20 billion. The situation is further compounded by the current low transaction fees, hovering around just 10 BTC ($946,000) as of November 27th (according to Glassnode data).
This means miners have two options: diversify their revenue streams or find ways to mine Bitcoin more cost-effectively than the current spot price of $96,000.
Adding to the pressure is the impending increase in mining difficulty, expected within the next few days. This metric measures the effort required to validate Bitcoin transactions, and a higher difficulty translates to increased mining costs. Notably, the mining difficulty has already surpassed 1 trillion and automatically adjusts roughly every two weeks.
The Power Struggle – Hashrate Soars, Miners Adapt
The driving force behind the rising difficulty is the soaring hashrate, which has remained above 700 exahash per second (EH/s) for over a month. Hashrate signifies the combined computational power dedicated to mining and processing transactions on the Bitcoin network. Glassnode data reveals a consistent upward trend in hashrate on a seven-day moving average, reaching a current high of 726 EH/s.
Many miners in 2024 have adopted a diversification strategy, venturing into industries like Artificial Intelligence (AI) and High-Performance Computing (HPC). These sectors experience a high demand for facilities capable of housing immense computing power, precisely what miners possess.
One such example is IREN (IREN), whose shares witnessed a significant 30% surge on Wednesday due to renewed interest in AI.
Alternatively, some miners, like MARA Holdings (MARA), are focusing on strengthening their Bitcoin holdings. MARA recently added 703 BTC to their existing reserves by issuing a convertible note. This brings their total Bitcoin holdings to 34,794 BTC as of November 27th.
With our 0% $1 billion convertible notes offering, we are excited to share an update:
— MARA (@MARAHoldings) November 27, 2024
– Acquired an additional 703 BTC, bringing the total to 6,474 BTC, at an average price of $95,395 per BTC
– YTD BTC Yield Per Share 36.7%
– Total owned BTC: ~34,794 BTC, currently valued at… pic.twitter.com/bzbunlyBRN
Investors looking for exposure to publicly traded miners can consider the CoinShares Valkyrie Bitcoin Miners ETF. Though the ETF’s share price has increased by 60% year-to-date, it underperforms Bitcoin’s impressive 113% growth.
The coming months will be crucial for Bitcoin miners. Their ability to navigate the challenges of revenue generation and rising mining difficulty will determine how they capitalize on the current market hype surrounding Bitcoin.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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