As Bitcoin approaches its anticipated "halving" event on April 20, crypto miners brace for a significant revenue drop that could cost the industry roughly $10 billion annually.

This reduction, which slashes the daily Bitcoin mining reward from 900 to 450 tokens, is expected to intensify the technological arms race among miners as they vie for diminishing returns.

Bitcoin Halving Set to Slash Miners' Revenues, Igniting a High-Stakes Tech Race

The Business Times reported that Bitcoin fans have long regarded a software upgrade known as the "halving," which occurs once every four years, as one of the keys to maintaining the currency's value.

This time, it is also expected to result in multibillion-dollar income decreases for the organizations that assure the digital currency's flawless operation, following a spike in their most expensive expenditures.

The halving will occur around April 20, reducing the amount of Bitcoin that "miners" can receive daily for validating transactions to 450, down from 900 currently. Based on Bitcoin's present pricing, the sector might face revenue losses of roughly US$10 billion annually.

Marathon Digital Holdings, CleanSpark, and other miners, which compete for a fixed Bitcoin payout by solving mathematical puzzles using superfast computers, have invested in new equipment and sought to acquire smaller competitors to offset revenue declines.

"This is the final push for miners to squeeze out as much revenue as they can before their production takes a big hit," said Matthew Kimmell, a digital asset analyst at CoinShares (via Coingape). "With revenues across the board decreasing overnight, the strategic response of each miner, and how they adapt, could well determine who comes out ahead and who gets left behind."

Bitcoin has reached new highs following past halvings, which helps offset the periodic decline in mining earnings and operational costs. This month's celebration occurs after the digital currency has more than doubled since November 2022.

However, the industry's margin of success is becoming increasingly narrow. Miners must keep spending more money in a never-ending technological arms race for fewer rewards.

While the energy-intensive validation has traditionally made mining expensive, corporations now face increased competition for electricity from the booming and well-funded artificial intelligence (AI) industry.

Bitcoin Price Surge Fuels Mining Boom, But Sector Faces Intense Competition for Resources

The rising price of Bitcoin has helped offset those power costs, fostering development in crypto mining. According to a JPMorgan Chase & Co. analysis published on April 1, the aggregate market capitalization of 14 US-listed miners has increased to almost $20 billion since the first specialist equipment was introduced in 2013.

While US-listed miners are the industry's face, they only account for roughly 20% of processing power, according to crypto researcher TheMinerMag. Private miners make up the rest and may be more susceptible after the halving, as they often rely on debt financing or venture capital to meet their demands. In contrast, public businesses can generate funds through share sales.

As the event's excitement grows, some traders predict mining stocks will plummet. According to S3 Partners' estimates, total short interest, or the dollar value of shares borrowed and sold by pessimistic traders, was over US$2 billion as of April 11.

According to Ihor Dusaniwsky, managing director of predictive analytics at S3, short interest accounted for about 15% of the group's outstanding shares, three times higher than the US average of 4.75.

The fourth upgrade since 2012 was preprogrammed by Satoshi Nakamoto, the mystery creator of Bitcoin, to keep the hard cap of 21 million tokens in place to prevent inflation as a currency.

The situation differs from four years ago when Bitcoin sold below US$9,000, and most mining activities occurred in China. Since then, much of that activity has moved to the United States, increasing electricity competition.

“Power in the US is extraordinarily constrained,” said Adam Sullivan, chief executive officer at Austin, Texas-based Core Scientific, one of the largest public Bitcoin mining companies. “Right now, miners are competing against some of the largest tech companies in the world, who are trying to find space for data centers, which are high energy consumers too.”

The young AI business is attracting large amounts of finance, making it difficult for miners to negotiate favorable electricity tariffs with utility companies. Amazon plans to invest around $150 billion in data centers, while Blackstone is developing a $25 billion data center empire. Google and Microsoft are also making significant investments.

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