Some miners have begun to use their own mining pools to broker large-scale Bitcoin transactions.
Miners will see their block rewards cut in half, but a series of new business lines could help make up some of the difference.
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Posted on April 12, 2024 at 5:43 PM ET.
With Bitcoin halving scheduled for the end of next week, Bitcoin mining operators are steadily deploying revenue diversification strategies aimed at offsetting pending losses due to reduced block rewards. There is.
Things have been good for miners recently, with pools posting record revenues, reaching nearly $2 billion in March. However, the halving is set to reduce the reward for mining individual blocks from his 6.35 Bitcoins (BTC) to 3.125 BTC. Miners derive most of their revenue from block rewards.
But a series of new business lines may be on the verge of making up for some of that discrepancy.
Read more: Bitcoin halving in 2024: What are miners doing differently now compared to 2020?
Some of the areas that miners from Hut8 to Hive Digital to Foundry have considered include selling computing power to GPU-intensive AI companies, or allowing other mining companies to set up and operate their own systems. This includes establishing a logistics department to support the Texas mining operators, including Riot Platforms, are also considering selling their power back to the grid.
Miners face “revenue volatility” in 2024, according to Galaxy Digital Research in February report.
According to Galaxy analysts, this uncertain environment is causing miners to seek new investments to “ensure predictability and stability of revenues and maintain investor confidence.”
Miners are also seeking to expand their authority to broker institutional-scale Bitcoin transactions. Miners facilitate transactions through their own mining pools and lock in large-scale transfers at specific times and prices.
Read more: Bitcoin Halving: What is it? How is it determined?
Marathon Digital (MARA) product We plan to process these types of transactions in February.
“This is aimed specifically at those who want to lock in their trades up front, and Marathon guarantees block space for a fractional fee,” said Adam Richard, vice president of capital formation at institutional crypto investment firm Two Prime. I can do it.'' “It’s great for very important single transactions that happen at the same time every day, like Bitcoin ETFs. You need to be sure they settle. [profit and loss] every day from Monday to Friday. It is important to reserve priority block space. I don't want it to fall. ”
Bitcoin miners follow the AI boom
Richard also said that he is increasingly seeing some miners, including Hut8, focus on outsourcing their significant computing power to third parties. Richard works with many Bitcoin miners through Two Prime and provides investment strategies designed for them.
Also known as high performance computing (HPC), the practice of computing sharing is not as simple as flipping a switch and turning a Bitcoin mining rig into an AI-generating unit. According to Galaxy's report, this practice became widespread during last year's AI boom, while Bitcoin remained in a bearish pattern.
Read more: Bitcoin's fourth halving is just around the corner. Is it still a good time to buy?
“The general lack of large-scale power generation in the U.S. primary and secondary markets is providing further tailwinds for miners to transition to HPC,” the report said. “[But] Moving from Bitcoin mining to HPC is a complex undertaking, and the business model is fundamentally different. ”
In another tactic, miners include: foundry has established a logistics division to assist third parties in buying, selling, repairing and ultimately recycling mining rigs.
more traditional tactics
While AI bidding and other unconventional miner strategies may not stand the test of time post-halving, companies are also tightening the hatches on their balance sheets in more conventional ways.
Some miners are doing “selling”. [BTC] A Grayscale Investments survey in February said they were setting aside reserves to ease short-term financial burdens. report. However, the report notes that bullish indicators including continued BTC ETF inflows have already built into the market an offsetting effect against a potential halving of selling pressure.
Ben Weiss, CEO of Bitcoin ATM specialist Coinflip, which has researched the halving, said miners are increasingly managing risk.
Weiss said this includes “geographic diversification” designed to avoid the risk of regulatory crackdowns on energy-intensive practices in certain jurisdictions.
He said that overall, miners are taking prudent risk management measures that may not have been present in the previous halving.
“Now, look at cryptocurrencies. There's ATMs, there's ETFs, there's infrastructure of miners, there's an ecosystem,” Weiss said. “And the infrastructure continues to develop more and more. In the last cycle, people were wondering if Bitcoin was going to be here. It's no longer a question of whether Bitcoin and cryptocurrencies are going to be here. .”
