Every four years, the rewards paid to companies that validate the Bitcoin network are cut in half. The next “halving,” as it’s called, is expected to happen later in April and comes at an interesting time in the evolution of the world’s most popular cryptocurrency.
Bitcoin (BTC) is a digital currency that circulates independently of banks or governments. A global network of specialized computers owned by many different players competes to solve complex math problems to add Bitcoin transactions to a digital ledger, with the winners rewarded with newly minted Bitcoins.
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The reward for these Bitcoin “miners” is 6.25 BTC now, but around April 20, that will fall to 3.125. The regular halving events keep the amount of circulating Bitcoin in check, reducing the potential for devaluation that comes from printing money. (For a more in-depth exploration of Bitcoin mining, check out our primer here.)
This halving comes as Bitcoin’s price has soared. In March, the currency hit an all-time high of more than $73,000, well above where it started in 2024, at about $45,000.
Although the rally began in October, it gained momentum this year after the Securities and Exchange Commission approved spot Bitcoin ETFs, which track the price of the cryptocurrency by holding Bitcoin directly.
Behind much of the demand are expectations that inflation will head higher once more, whether that’s sooner or later. Over time, the cryptocurrency may hold its value better than the dollar, in large part because of its controlled supply, facilitated by halvings. Also, if the Federal Reserve does end up making interest rate cuts later this year, investors’ appetite for risky assets, such as the very volatile Bitcoin, may increase. Meanwhile, recent trends affecting the Bitcoin mining industry are bringing about changes reflective of the broader U.S. business economy, including a move toward sustainability:
— More focus on renewable energy.
— More complex equipment and resources.
— More pressure from halving, competition.
More Focus on Renewable Energy
The Bitcoin price surge puts a spotlight on the energy used by power-hungry mining computers. China has banned the practice outright, which arguably helped reduce carbon emissions and contributed to the move toward more sustainable practices. The U.S. Department of Energy launched an investigation into power use associated with crypto mining but then suspended the probe in response to a February lawsuit by Riot Platforms Inc. (RIOT) and the Texas Blockchain Council.
“Many U.S. crypto mining facilities draw power from the grid, which often increases emissions from fossil-burning power plants that pollute our air and water and that contribute to climate change,” environmental group Earthjustice said in March.
The pushback from environmentalists comes amid a wider interest among investors in evaluating companies based on environmental, social and governance, or ESG, criteria in addition to more traditional financial metrics.
The Bitcoin mining industry is responding in kind, with the latest step in its evolution involving a focus on more green power.
“Recent trends in Bitcoin mining include the rise of large-scale mining operations, particularly in regions with abundant and cheap electricity,” says Bundeep Singh Rangar, CEO of digital asset investment company Fineqia International Inc. (ticker: OTC: FNQQF). But, he says, there’s “also a growing interest in sustainable mining practices, with some miners exploring renewable energy sources to mitigate environmental concerns.”
More Complex Equipment and Resources
When Bitcoin launched in 2009, people could contribute to the mining process with their home computers. But as the network expanded and the math became more complex, miners had to get more powerful computers to be competitive. Top miners use stacks of specialized computers.
Rob Chang, CEO of Gryphon Digital Mining Inc. (GRYP), says miners that have renewable energy sources have an advantage over those that don’t, given the recent pushback against crypto mining’s energy use.
“We benefit from lower operating costs and align with growing ESG concerns among investors and the public, which could become increasingly important as regulatory pressures intensify,” says Chang, who adds that Gryphon’s operations are fully powered by renewable energy sources.
Henry Robinson, head of crypto with Decimal Digital Currency, says mining companies are increasingly using gas from oilfields that would otherwise be flared to achieve low energy costs and help reduce greenhouse gas emissions.
“Miners utilizing renewable energy sources can potentially have a competitive advantage, especially in the current landscape, where environmental concerns are increasingly in focus,” Rangar says. “Not only does it align with sustainability goals, but it can also mitigate regulatory and public relations risks associated with energy-intensive mining operations.”
[What the Bitcoin Halving Event Could Mean for Crypto Markets]
More Pressure From Halving, Competition
It’s possible that the upcoming Bitcoin halving will be a mixed bag for miners.
It will reduce their Bitcoin rewards, but it may also lead to fewer Bitcoins being produced, which could raise Bitcoin prices and help miners’ shares.
“Historically, Bitcoin halving events have had a significant impact on miner economics,” Rangar says. “They tend to reduce the rate of new Bitcoin issuance, potentially leading to increased scarcity and upward pressure on prices.”
But because the event has been known for some time now, he says this effect has likely already been priced into miner stock valuations.
Top picks among publicly traded Bitcoin miners can include the more established ones, he says, such as Marathon Digital Holdings Inc. (MARA), CleanSpark Inc. (CLSK), Phoenix Group Holdings PLC (OTC: PNXGF), Riot Platforms and Cipher Mining Inc. (CIFR).
Robinson, who thinks all of the miners are overvalued, is cautious about the space.
“If there isn’t a Bitcoin price rise to counter decreasing mining profitability because of the halving, most of the public miners will burn cash on selling, general and administrative expenses far beyond their mining profits,” he says. “Puzzling out their long-term success is murky, and they are glaring with contraction risk. Any prolonged downturn will crush these companies to a fraction of their current market caps.”
The halving could increase the production cost of Bitcoin, eating into miner profitability if the price of Bitcoin doesn’t increase correspondingly, Chang says. That could lead to miners with higher production costs shutting down or reducing operations and slowing the rate of Bitcoin production.
“But publicly listed mining firms that operate with lower energy costs and more efficient equipment are expected to navigate the post-halving environment more effectively,” he says. “They might increase their market share by continuing to mine profitably, thanks to their operational efficiencies and possibly lower electricity rates. The principle here is survival of the fittest, where only the most efficient miners are likely to succeed in the new economic conditions.”
More from U.S. News
What the Bitcoin Halving Event Could Mean for Crypto Markets
Bitcoin Halving 101: What Is It and Why Does It Matter?
7 Best Cryptocurrency Mining Stocks
In ‘Survival of the Fittest,’ Bitcoin Miners Lean Into Sustainability originally appeared on usnews.com
