The approaching bitcoin halving is sending some bitcoin mining companies running for cover.
Others, meanwhile, are rushing out to score good deals.
"We're really paying attention to the full spectrum right now of assets and companies that might be more on that marginal cost curve so that we can ensure we're prepared for any types of opportunities that may arise," Adam Sullivan, CEO of bitcoin mining company Core Scientific (CORZ), told Investor's Business Daily.
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Most industry watchers expect the reduced reward for bitcoin mining to push some out of the business. That, in turn, could lead to a glut of specialized mining hardware. "As those marginally profitable miners start to experience cash-flow issues, it can be a great opportunity for Core Scientific to buy machines at discounted prices," said Sullivan.
Sullivan says the halving will kick off a massive equipment buying frenzy in the bitcoin mining sector, driven by a need for modernized, efficient mining hardware as the reward drops. "You're going to see an acceleration on ASIC demand, people rotating into newer generation machines," said Sullivan.
The Big Bitcoin Mining Rig Demand Blowup
ASICs, or Application-Specific Integrated Circuit processors, are the type of chips powering the most modern and specialized mining rigs. The first mining-specific ASIC rigs appeared in 2013, according to CoinDesk, and are solely designed to handle the cryptographic math needed to "mine" bitcoin. ASICs soon supplanted GPUs from Nvidia (NVDA) and AMD (AMD), which had themselves replaced microprocessors in ordinary, at-home computers. But with every new wave of technology, efficiency remained the goal: more crypto calculations with less energy.
Some of the currently top-rated mining chips and computers come from China-based players, including Bitmain, MicroBT and Cannan (CAN).
The influx of new mining hardware permits miners some flexibility in dealing with their energy costs. Industrial bitcoin mining also considers the cost of electricity in different locations throughout the U.S. "We're taking the most efficient machines and putting them to our highest uptime locations," said Sullivan. "We're then taking our least efficient machines and allocating them to our facilities where we can be much more selective about the power costs." Core Scientific says it currently operates facilities in Georgia, Kentucky, North Carolina, North Dakota and Texas.
Halving Approaches In April
Prior bitcoin halvings occurred in 2012, 2016 and 2020. Bitcoin's next halving appears set to occur later this month.
Bitcoin's halving is a function built into the cryptocurrency from the onset, laid out by reputed creator Satoshi Nakamoto in the original 2008 bitcoin white paper. Bitcoin is "mined" by verifying transactions across the bitcoin network, creating a block that's added to the chain of previous transactions. (This creates the so-called blockchain.) When other bitcoin miners agree that the block is valid, the block becomes a bitcoin that goes to the first miner. Meanwhile, the block is itself used to hash new transactions.
Estimates call for April's halving to reduce mining rewards to 3.125 bitcoin per block, down from 6.25 per block. Because bitcoin mining occurs at a steady rate, halvings tend to occur roughly every four years.
"Mining companies are going to be making very large purchases to ensure the long-term stability of their business and to make sure they can survive through these difficult times of the year," said Sullivan.
Weathering Difficult Times In Bitcoin Mining
Core Scientific is no stranger to lean times in crypto. The Austin, Texas-based bitcoin miner filed for bankruptcy during the 2022 drop in crypto prices popularly called the "crypto winter." Core Scientific continued its mining operations through the bankruptcy, and emerged in January, reclaiming the ticker CORZ.
Core Scientific currently has a market cap of $555.9 million, well below its $4.3 billion market debut via special purpose acquisition company, or SPAC, in 2021. The mining company's stock saw its shares spike to a year-to-date high of 4.29 in March before reversing to a low of 2.95 after the company reported its first post-bankruptcy earnings. Core Scientific is unranked in its Computer Software group, although it does hold a Composite Rating of 84, according to IBD Research.
The top publicly traded miners include Riot Platforms (RIOT) and Marathon Digital (MARA).
Core Scientific remains optimistic it can weather the halving and keep its spot as one of the largest bitcoin miners. "We know we'll have an opportunity to refresh our machines post-halving, putting us in a really strong position to continue to grow to 2025," said Sullivan. "We know what it takes from a capital allocation perspective and we know what it means to put cash on the balance sheet to be able to take advantage of bear markets versus being concerned about profitability."
"We've been through halvings before. We know what it takes to survive," he said.
Follow Mike Juang on X at @mikejuangnews and on Threads at @namedvillage.
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