Benzinga - by Murtuza Merchant, Benzinga Staff Writer.
A new report predicts a substantial rise in production costs due to the halving, with electricity and overall production costs nearly doubling.
What Happened: The report by Coinshares estimates the average production cost per Bitcoin (CRYPTO: BTC) among listed mining companies is now approximately $53,000.
It forecasts the overall network hash rate to reach a record 700 Exahash by 2025.
However, it also predicts a potential drop of up to 10% as miners shut down unprofitable operations after the halving.
Rising Costs And The Halving Challenge
The report, spearheaded by James Butterfill, Head of Research at CoinShares, points out a critical upcoming challenge: the potential 10% drop in the hash rate due to the Bitcoin Halving.
With mining rewards reduced by half, miners could be forced to turn off less profitable ASICs, leading to a significant reevaluation of operational strategies.
“The halving will precipitate a substantial increase in electricity and overall production costs, nearly doubling current figures,” Butterfill explained.
“Miners will need to optimize energy costs, enhance mining efficiency, and secure favorable hardware procurement terms to mitigate these headwinds.”
Also Read: Bitcoin In The Danger Zone: Is A 20% Price Crash Imminent?
Strategic Shifts And AI Integration
As the industry navigates these economic pressures, a shift towards artificial intelligence (AI) at energy-secure locations is emerging as a potential buffer.
Companies like BitDigital, Hive (NASDAQ:HIVE), and Hut 8 (NASDAQ:HUT) are already capitalizing on AI to supplement income, suggesting a dual-focus strategy that could become more prevalent across the sector.
“The integration of AI operations at energy-secure sites presents a new revenue avenue, potentially cushioning the financial impact of increased mining costs,” said Max Shannon, a Research Analyst involved in the study.
Market Dynamics And Forecasting
Looking ahead, the CoinShares team forecasts a challenging environment post-halving, with hash prices expected to fall.
This prediction aligns with a broader trend of increased cost burdens, particularly in electricity consumption and ASIC efficiency.
“Our model anticipates a hash rate rise to 700 Exahash by early 2025, but the post-halving period could see a reduction to about 630 Exahash due to the shutdown of unprofitable mining units,” noted Alex Schmidt, Index Fund Manager at CoinShares.
The report also highlights a growing trend towards relocating Bitcoin mining operations to stranded energy sites, which can offer more sustainable energy solutions.
“This shift not only helps in reducing the carbon footprint of mining operations but also enhances the overall profitability by lowering energy costs,” added Satish Patel, an Investment Analyst at CoinShares.
Insights at Benzinga’s Future Of Digital Assets Event
These findings are set to be a topic of discussion at Benzinga’s upcoming Future of Digital Assets event on November 19, where industry leaders will converge to discuss the implications of these trends for the global cryptocurrency market.
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