Bitcoin Miners' Revenue Halved, $10B Loss, Kaiko Warns

Bitcoin miners face a $10 billion revenue hit from halving, prompting potential increased selling pressure amid liquidity concerns.

By Barry Stearns

5/13, 14:08 EDT
Bitcoin / U.S. dollar
Marathon Digital Holdings, Inc.
Riot Blockchain, Inc

Key Takeaway

  • Bitcoin miners face increased selling pressure due to halving event cutting revenue by $10 billion annually, impacting Marathon Digital, Riot Platforms, and Cipher Mining.
  • Despite a temporary boost from memecoin transaction fees post-halving, the overall miner revenue is down with potential market impact as liquidity dries up.
  • Major mining companies like Marathon and Riot hold significant Bitcoin reserves worth over $1.6 billion combined, amidst a 15% drop in Bitcoin price from its all-time high.

Miners Face Revenue Challenges

The cryptocurrency market is bracing for increased selling pressure as Bitcoin miners, holding significant amounts of the digital asset, confront a sharp decline in revenue. This downturn is attributed to a recent Bitcoin code update known as the halving, which effectively halved the mining subsidy from 900 tokens to 450 daily. This adjustment, the fourth of its kind since 2012, has led to an estimated annual revenue loss of about $10 billion for crypto-mining companies like Marathon Digital, Riot Platforms, and Cipher Mining. Although a surge in transaction fees, spurred by the launch of memecoins on Bitcoin, temporarily mitigated this loss, the subsequent decline in memecoin activity has seen these fees plummet.

Liquidity Concerns Amid Summer Slowdown

Kaiko, a research firm, has highlighted concerns over potential market impacts if miners are compelled to sell a portion of their holdings in the coming months. The report, released on Monday, points to a typical slowdown in trading activity and liquidity during the summer months, suggesting that any forced sales by miners could exacerbate market pressures. Despite selling most of their reserves during the last crypto meltdown in 2022, miners have since been holding more of their assets, buoyed by a rebound in the digital-asset market. Notably, Marathon and Riot, two of the largest public Bitcoin mining companies, currently hold 17,631 and 8,872 Bitcoin, valued at just over $1.1 billion and over $500 million, respectively.

Mining Difficulty and Market Share

A significant development for Bitcoin miners has been the recent 6% drop in mining difficulty, the largest decline since the crypto winter of December 2022. This decrease is seen as a positive for miners, particularly for Riot Platforms (RIOT) and CleanSpark (CLSK), which are recognized for their low production costs and strong financial positions. The drop in mining difficulty, coupled with the halving's impact on operational costs, has led to a shutdown of higher-cost mining equipment, thereby reducing the overall network hashrate. This scenario has allowed certain miners to increase their market share by almost 20 basis points post-halving, according to analysts Gautam Chhugani and Mahika Sapra from broker Bernstein.

Street Views

  • Kaiko (Bearish on the cryptocurrency market):

    "If miners were forced to sell even a fraction of their holdings over the coming month this would have a negative impact on markets. Trading activity typically slows down and liquidity dries up over the summer months."