Core Scientific CEO Shares Insights on the Impact of Bitcoin Halving on Mining
Hongji Feng
Last updated: April 9, 2024 02:47 EDT
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4 min read
Bitcoin halving, a significant event for the network and the cryptocurrency market, has a particular effect on the mining sector as it reduces the reward for mining Bitcoin by half.
The upcoming fourth halving, expected to take place around April 19, will decrease the block reward from 6.25 to 3.125 BTC. This programmed adjustment occurs every four years and follows the pattern established since the first halving in 2012. Its purpose is to control inflation and simulate the scarcity of traditional resources.
In an interview with Cryptonews.com, Adam Sullivan, President and CEO of Core Scientific, discusses the challenges and opportunities presented by this halving. Core Scientific is one of the largest Bitcoin miners in the U.S., operating seven facilities across five states.
How Bitcoin Halving Will Affect Miners
Sullivan first acknowledges the unique environment and transformative nature of this upcoming event, which coincides with the approval of Bitcoin exchange-traded funds (ETFs) in the same year.
“This halving is interesting, it’s different from 2020. I would say we’re more decentralized now in terms of where miners are located,” he explained.
“We’re at a point now where the majority of the hash rate that’s online today can actually stay online after the halving,” said Sullivan. “I think that will prolong the cycle.”
Due to potential infrastructure constraints, Sullivan believes that there will be limited new-generation machines coming online. Additionally, miners will experience significant margin compression in the first few months following the halving.
“I would say a number of marginal operators will be able to survive, but only for a limited time,” said Sullivan.
Anticipating a difficult time for miners, Sullivan also argues that many players in the industry will sell their assets and even companies for cash by the end of 2024.
“You can only survive for three to four months on cash before a lot of these companies have to say, ‘I need a big cash infusion. Let me sell some of my assets,'” he explained.
“I think no one will be surprised by the significant amount of mergers and acquisitions that will occur,” Sullivan noted.
The Future of Mining in a Changing World
In addition to the halving event, the future of the U.S. mining industry faces significant changes driven by external economic factors and the ongoing search for cost-effective mining locations.
As power prices rise in regulated markets, Sullivan predicts a restructured and redefined mining business in North America, especially as miners struggle to find opportunities to operate large facilities across the United States.
“It’s amazing how people can find low-cost power in other countries,” he said. “The China shutdown in 2021 accelerated exploration around the world. And we’re going through that again.”
Looking ahead to the next cycle until 2028, Sullivan highlights emerging opportunities in Africa and South America, and identifies the Middle East as a growing hub for low-cost power.
“There are locations that have access to power and want to bring jobs to their communities, and some countries are advertising that right now,” said Sullivan. “But we might find that Northern Canada becomes the Holy Grail of Bitcoin mining four years from now.”
Even if Bitcoin mining operations were to emerge in new territories, Sullivan states that the existing leaders will likely pilot the projects with the help of local parties.
“There are many nuances to running the game,” he said. “You learn how to design buildings more efficiently through experience.”
“The local parties provide us with information like temperature, humidity, wind speeds, and parcel orientation, and we can design a facility optimized for those weather conditions,” claimed Sullivan. “That’s something you can’t learn on your first build.”
Bitcoin Halving and Market Volatility
Adam Sullivan also discusses the potential impact of the Bitcoin halving on its price, stating, “We will definitely see more volatility after the halving.” He mentions the role of ETFs in providing broader access to Bitcoin, which could eventually help stabilize fluctuations over time.
Regarding external factors, Sullivan says, “Policies from the Federal Reserve during an election year could boost Bitcoin prices if inflation rises…But I think there’s a real possibility that we will stay flat after the halving.”
In conclusion, he suggests that the long-term prospects for Bitcoin are likely positive, stating, “Easier access to Bitcoin through ETFs could lead to greater price increases as more financial institutions get involved.”
“And for Core Scientific, we believe we are well-prepared for this upcoming halving. We have a plan for the next four years that we are executing to remain a highly competitive Bitcoin miner in 2028,” said the CEO.
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