As US-listed bitcoin miners face tightening profit margins and increasing competition for resources, companies are turning to stockpiling cryptocurrency to ride out the storm. Firms like Mara Holdings, Riot Platforms, and CleanSpark have raised over $3.7 billion from investors since November, capitalizing on the recent surge in bitcoin prices, which reached $100,000 last month. The raised funds are primarily being used to purchase more bitcoin, giving the miners a financial cushion to withstand rising energy costs and the ongoing challenges of the mining sector.
The increased interest in bitcoin mining follows the promise made by incoming US president Donald Trump to have bitcoin “mined, minted, and made in the USA.” However, as Financial Times reports, the surge in bitcoin prices has not solved all of the industry’s challenges. Russell Cann, chief development officer at Core Scientific, noted that the industry still faces substantial profitability hurdles and energy access issues.
For many miners, the rush to accumulate bitcoin is a defensive strategy in response to high energy costs and a market that has become increasingly competitive. Bitcoin miners rely on complex computer programs to validate new blocks of transactions, earning rewards in the form of bitcoin. However, the recent halving of mining rewards, which took place in April, has reduced the daily supply of new coins available to miners from 900 to just 450. CoinShares, an investment group, estimated that the cost to mine a single bitcoin for US-listed miners rose to $55,950 in the third quarter of 2023, with total costs—accounting for depreciation and stock-based compensation—surging to $106,000 per bitcoin.
The rise in bitcoin prices, however, has provided a glimmer of hope for miners. The profitability of mining, measured by the “hash price,” has increased 32% since Trump’s victory, motivating miners to seek fresh capital. Some companies, like Mara and Riot, are following in the footsteps of MicroStrategy, which has made bitcoin its corporate reserve asset. Fred Thiel, CEO of Mara Holdings, stated that the company’s business model is now focused on accumulating as much bitcoin as possible, and it currently holds nearly 45,000 bitcoins valued at over $4.4 billion.
While many miners are capitalizing on the high price of bitcoin, the competition is intensifying. The hash rate—the collective computing power used to secure the bitcoin network—has reached an all-time high, adding further pressure on miners’ profitability. As new entrants flood the market with additional mining hardware, costs are expected to rise, potentially negating the benefits of bitcoin’s price increase.
The US mining industry is also grappling with competition from other sectors, particularly artificial intelligence (AI) developers. AI data centers, which use the same type of processing hardware required for bitcoin mining, are outbidding miners for access to electricity and grid resources. Core Scientific’s Cann has predicted that the majority of bitcoin mining operations will eventually move outside of the US, as AI demand for energy increases.
In response to these pressures, some companies, such as Mara, are looking to offshore their mining operations, with plans to expand to countries like Kenya, the UAE, and Paraguay, where surplus energy is more readily available.
Meanwhile, as the cryptocurrency industry continues to grow, regulatory concerns remain high. Rostin Behnam, chairman of the Commodity Futures Trading Commission (CFTC), has warned about a regulatory “gap” in the digital asset space, especially with the increasing involvement of traditional financial institutions and the growing demand for cryptocurrencies. Behnam, who will step down on the day of President-elect Trump’s inauguration, emphasized the need for clear regulations to protect investors and ensure the security of the market. The CFTC has already taken significant steps in regulating the crypto sector, including its lawsuit against Binance, the world’s largest cryptocurrency exchange, which resulted in a $4.3 billion settlement.
As Behnam prepares to leave office, his successor will likely face increasing pressure to fill the regulatory void in the fast-evolving crypto market, which has seen substantial growth in trading, mining, and political betting markets. Behnam has advocated for strong, comprehensive regulation of digital assets, which he believes is crucial to maintaining market integrity and protecting investors from potential risks.
