Bitcoin miners brace for impact as halving goes live
AUSTIN, TEXAS — Adam Sullivan left investment banking to mine bitcoin at an awkward time. It was May 2023, bitcoin was trading at around $21,000, U.S. regulators were in the thick of cracking down on the sector writ large, and Core Scientific, the company he had agreed to take over, was battling angry lenders in a Texas bankruptcy court over tens of millions of dollars in outstanding debt.
But Sullivan knew that, with a lifeline, he could get the business to a much better place. That’s because the halving was on the way, and with it would likely come a big rally in bitcoin.
Late Friday night, the bitcoin code automatically cut new issuance of the world’s largest cryptocurrency in half. It happens roughly every four years, and in addition to helping to stave off inflation, it historically precedes a major run-up in the price of bitcoin.
The technical event is relatively simple: Bitcoin miners get paid in bitcoin to validate transactions, and after 210,000 blocks of transactions are computed and added to the main chain, the reward given to the miners securing bitcoin is ‘halved.’
There are more than a dozen publicly traded miners on the network and thousands of smaller, private ones around the globe, constantly racing to process transactions and get paid in new bitcoin. Because the event leads to a cut to rewards paid to miners directly, they’ll be the first ones to feel the impact of the halving.
The price of bitcoin has touched new all-time highs after each “halving” event.
CNBC
Typically, when the halving cuts supply, it’s led to huge rallies for bitcoin.
In fact, the previous (and only) three halvings in the chain’s history have come before every bull run, in which the coin has touched new all-time highs and a surge of investors have entered the market for the first time.
That rapid price increase has helped many miners stave off the worst since it tends to offset the impact of having the block prize cut in half.
“As a company that was already in the process of scaling our infrastructure during the previous halving, we know the toll that halvings can take on a company if it is not adequately prepared,” Core’s Sullivan told CNBC.
The aggregate market cap of the 14 U.S.-listed bitcoin miners tracked by JPMorgan analysts declined 28% over the first half of April to $14.2 billion, reaching year-to-date lows. Bitdeer was the best-performing stock over the period, down around 20%, versus Stronghold Digital, which was 46% lower.
Some have billed the 2024 bitcoin halving as a seminal moment for the mining sector. Depending on how much prep work miners have done, it could easily make or break them.
“Being prepared for a halving means evaluating all of your power strategies, all of your software capabilities, all of your operations,” continued Sullivan.
Others are less concerned given recent price moves in bitcoin.
In a research note from Needham on Apr. 16, analysts said they expect the halving to only have a modest impact to miners’ estimated EBITDA margins, despite the 50% reduction in revenue, since the price of bitcoin has been trading in the range of $60,000 to $70,000.
“We expect geopolitical tensions and interest rate policy to be the biggest near-term drivers of crypto price action,” Needham analysts wrote, adding that at a bitcoin price above $60,000, the halving is “derisked for nearly all public miners.”
The bank did, however, single out their preference for low-cost bitcoin producers like Riot Platforms, Bitdeer, and Cipher Mining. Meanwhile, if bitcoin prices fall, Needham says the most outsized native impact will be felt by higher cost producers that are also levered to higher bitcoin prices via large treasury holdings.
Analysts from JPMorgan echoed a similar sentiment, writing in an Apr. 16 research note that they think “recent weakness offers an attractive entry point” for investors and that they are “especially bullish” on Riot, which they believe offers attractive relative valuations.
The 14 U.S.-listed miners tracked by JPMorgan account for around 21% of the bitcoin global network.
Power supply for Whinstone’s bitcoin mine in Rockdale, Texas.
Years spent bracing for the halving
Miners have had years to prepare for the halving, including seeking lower power costs and upgrading their fleets to more efficient machines.
“Bitcoin’s halving happens like clockwork every four years,” said Haris Basit, chief strategy officer of Bitdeer Technologies Group. “It’s a known variable that is a benchmark for us to remain focused on operational excellence.”
To that end, the Singapore-headquartered mining firm has invested in new data centers, but its core strategy has been to increase vertical integration through research and development. 25% of its staff is focused on R&D efforts, which Basit says have “led to new innovations and revenue pathways, such as our recently announced 4nm mining rigs and AI Cloud offerings.”
Analysts at Cantor Fitzgerald recently named Bitdeer as having one of the industry’s lowest “all-in” cost-per-coin.
Greg Beard, the CEO and Chairman of Stronghold Digital Mining, tells CNBC that miners whose only lever is more efficient machines will be at a disadvantage.
“Miners who own their low-cost power are better positioned,” said Beard. “Operational costs will be lower, allowing them to be more flexible with their capital.”
Core’s Sullivan agrees, noting that bitcoin mining data centers in the future will work hand-in-glove with power generators and grid operators to serve as a virtual battery for grid operators – allowing them to increase base load, curtail bitcoin data centers when they need to, and avoid peak generation loads, which he says are dirty and expensive.
“We own and operate our infrastructure, giving us greater control over operational and strategic decisions, such as the potential to expand into high-performance computing hosting,” said Sullivan.
Core Scientific, which launched in 2017 and now manages seven mining sites in five U.S. states, also owns the full technology stack. The company has been looking to diversify its revenue streams beyond purely bitcoin. Sullivan says that existing data centers offer reconfiguration opportunities to accommodate new types of high-value compute.
“Certain data centers are located in close proximity to major metropolitan areas, making them candidates for low-latency, high-value compute applications,” said Core’s CEO.
Bitdeer’s bitcoin mine in Rockdale, Texas.
Riot Platforms CEO Jason Les told CNBC that preparation for the halving came down to the company’s long-standing focus on achieving a low cost of power, strong balance sheet, and significant scale of operations. Les says that’s what has positioned the firm to both withstand the halving with positive margins and be well positioned for upside on the other side of it.
“Our new Corsicana Facility was energized just this week, and we will be significantly scaling up our hash rate with next-generation equipment at that new site over the remainder of the year,” said Les. “As a result, we are positioned to mine more bitcoin per day at the end of the year than we do today, despite the halving.”
Marathon Digital, which has grown more than 70% in the last year, took a different approach to scaling the business than its rivals. CEO Fred Thiel tells CNBC that the company grew quickly using an asset-light approach, where Capex was spent on mining rigs rather than infrastructure.
“In December, we owned less than 5% of the sites where we were hosting our miners,” said Thiel. “Today we now own 53% of our total 1.1 gigawatts of capacity, having purchased it at less than the build and replacement cost.”
Owning sites lowers Marathon’s cost to mine by up to 20% on a marginal cost basis. Thiel also noted that by the end of 2024, Marathon expects to further improve efficiency by 10% to 15% as they deploy the next generation rigs across their new sites.
That boost to efficiency isn’t just about new gear, however. The firm is deploying its custom firmware, which allows it to operate even more efficiently.
Marathon, along with other mining firms, has begun diversifying its business model into ancillary operations beyond purely bitcoin mining.
Thiel says the company recently launched an energy harvesting division, where they are compensated to convert stranded methane and bio-mass into energy and then sell heat back into an industrial or commercial process, which essentially subsidizes and lowers our cost to mine significantly. Marathon expects this new business line to generate a significant portion of its revenues by the halving in 2028.
Diversifying revenue
The April 2024 bitcoin halving looks a lot different than the three that came before it.
For years, increased competition resulting from new miners coming online has been cutting into profits, because more miners means more people are sharing the same pool of rewards.
In a research note from JPMorgan on Apr. 16, analysts note that the network hashrate, a proxy for industry competition and mining difficulty, was up 4% in April from the month before. Stronghold’s Beard says the halving is a headwind dwarfed by the global hashrate increasing nearly five-fold from the last one in May 2020.
“Mining is a tough industry especially because there are a lot of nation states that have extra power power and they’re dedicating it to mining,” said Nic Carter of Castle Island Ventures. “It’s a free market, anybody can enter into it as long as they basics.”
U.S. spot bitcoin exchange-traded funds have also significantly shifted the pricing dynamics. In years past, the price of bitcoin didn’t surge until after the halving. But in the wake of record flows into these spot bitcoin funds, the world’s largest cryptocurrency touched a fresh all-time-high above $73,000 in March.
“The recently approved Bitcoin ETFs have proven to be huge pipelines of capital into Bitcoin and that universe of ETFs continues to grow with the recent approvals in Hong Kong as well,” said Riot’s Les. “We think the price action we’ve seen in bitcoin year-to-date reflect that and has us very optimistic on what bitcoin mining economics can look like in the months and years post-halving.”
Blackrock’s ETF reached $17 billion in net assets within a few months of launching. Beard of Stronghold tells CNBC that if Blackrock added even just a billion dollars more of bitcoin in April to its ETF, it would single handedly create demand for more coins than the mining industry will supply post halving.
What is also different this time around is that the block reward is no longer the primary form of miner revenue. Recent programming innovations in bitcoin have given way to a burgeoning ecosystem of projects building on top of bitcoin’s blockchain, which has translated to greater transaction fee revenue for miners.
There is a limit to how large the blocks can go but the value of those blocks is about to increase significantly, according to Bill Barhydt, who is the CEO and founder of Abra. From Barhydt’s vantage point, he supports miners with a mix of services, including their auto liquidations, so he has access to a lot of macro data across the sector.
“The math is simple,” begins Barhydt. “Bitcoin blocks are fixed in size and the demand for data within those blocks is going to increase significantly for several reasons, including more retail wallet holders moving their Bitcoin into and out of storage, new uses cases like Ordinals (NFT’s for Bitcoin) and DeFi on Bitcoin, institutional settlement requirements for exchange traded products in the U.S., Hong Kong, Europe, etc, lightning settlement transactions and more.”
At the current rate of adoption, Barhydt believes that transaction fees in this cycle would likely peak within 24 months at 10 times their cost during the previous cycle peak, due to a combination of a higher price for bitcoin itself, combined with higher demand for the space inside each block.
Castle Island’s Carter isn’t so sure that fee-based revenue can completely make up for lost income post-halving.
“It’s not entirely clear that fees are fully offsetting the lost revenue, and in fact, I don’t expect that to happen” said Carter.
Fees tend to be really cyclical. They rise sharply during periods of congestion, and they fall back to near zero during other normal periods. Carter cautions that miners will see spikes in fees, but there is not yet an enduring, strong, and robust fee market most of the time.
Swapping ASICs for AI
In the last year, there has been a surge in demand for AI compute and infrastructure that can support the massive workloads required to power these novel machine learning applications. In a new report, digital asset fund manager CoinShares says it expects to see more miners shift toward artificial intelligence in energy-secure locations because of the potential for higher revenues.
Already, mining firms like BitDigital, Hive, Hut 8, Terawfulf, and Core Scientific all have current AI operations or AI growth plans.
“This trend suggests that bitcoin mining may increasingly move to stranded energy sites while investment in AI grows at more stable locations,” write analysts CoinShares.
But pivoting from bitcoin mining to AI isn’t as simple as re-purposing existing infrastructure and machines. The datacenter infrastructure is different, as are the data network needs.
“AI presents several challenges, notably the need for distinct and considerably more costly infrastructure, which establishes barriers to entry for smaller, less capitalized entities,” continues the report. “Additionally, the necessity for a different skill set among employees leads to increased costs as companies hire more AI-skilled talent.”
The rigs used to mine bitcoin are called ASICs, short for Application-Specific Integrated Circuits. The “Specific” in that acronym means that it can’t be used to do other things, like supporting the underlying infrastructure for AI market.
“If you’re a bitcoin miner, your machines can’t be repurposed,” explains Carter. “You have to buy net new machines in order to do it and the datacenter requirements are different for AI versus bitcoin mining.”
Sullivan says that Core Scientific, which has been mining a mix of digital assets since 2017, began to diversify into other services in 2019.
“The company has owned and hosted Nvidia DGX systems andGPUs for AI computing, having built and deployed a specialized facility specifically for high-value compute applications at our Dalton, Georgia data center campus,” he said.
Core has also partnered with CoreWeave, a cloud provider which provides infrastructure for use cases like machine learning.
Sullivan says the combined capabilities will support both AI and High Performance Compute workloads, resulting in an estimated revenue of $100 million, though he says the total potential revenue is much higher given their significant infrastructure footprint that can be fitted to host some of the most advanced GPU compute coming to market.
“Bitcoin mining is an early example of high-value compute, attracting significant capital and a number of companies scaling their operations to support the Bitcoin Network,” said Sullivan.
But Sullivan thinks few operators will be able to make the transition to AI.
Sullivan continued, “Bitcoin mining sites can only be repurposed if they meet the attributes that are required for HPC. Many existing sites across North America do not meet these needs.”
Electric bikes are booming in popularity across the US, and cities are starting to take notice. From famous programs like those in Denver to smaller initiatives around the country, local governments are rolling out rebate and incentive programs to make e-bikes more affordable, especially for lower-income residents. The goal? Get more people out of cars and onto two wheels.
E-bike incentives vary widely by city and state, but the overall trend is clear: public officials increasingly see e-bikes as a low-cost, low-emission transportation solution that checks a lot of boxes. E-bikes are cheaper than cars, don’t require gas, and are far more accessible than public transit in many neighborhoods. And with the ability to flatten hills and shrink long commutes, they’re attracting a much broader audience than traditional bikes.
Programs like Denver’s wildly popular e-bike rebate initiative have shown how effective these incentives can be. The city offers over $1,00 off an e-bike purchase depending on income level, and the demand has been enormous. Rhode Island recently launched its own statewide rebate program offering up to $750, and cities like Ann Arbor, Oakland, Providence, and dozens of others are following suit with their own variations. A Bend, Oregon program will offer free e-bikes to locals. Washington D.C. is piloting a rebate targeted at delivery workers, and even some utility companies, like Vermont’s Green Mountain Power, have gotten in on the action.
These programs especially benefit lower-income residents, who may rely on expensive or unreliable transportation options to get to work, school, or the grocery store. By offering higher rebates to income-qualified applicants, many programs aim to level the playing field and make car-free living more realistic.
Of course, not every program has gone smoothly. California’s statewide e-bike incentive, much hyped before its launch, faced repeated delays and technical issues that left many applicants frustrated. While the program finally began distributing vouchers this year, the rollout highlights the challenges of scaling these efforts statewide without sufficient infrastructure or planning.
Still, the momentum is undeniable. As cities grapple with climate goals, traffic congestion, and rising transportation costs, e-bike rebates are a relatively cheap way to make a big impact. The biggest challenge now may be keeping up with demand.
Electrek’s Take:
This is one of those rare win-win policies: cleaner air, less traffic, more mobility for people who need it most – and it’s all powered by a single horsepower and some political will. Let’s hope even more cities plug into this trend.
Of course, funding is the biggest obstacle to keeping programs like these rolling. But with the benefits stacking up, from reduced road damage to improved air quality, hopefully the rewards outweigh the upfront cost.
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Tesla will use Samsung for as a supplier for its self-driving computer’s next-gen hardware in a $16.5 billion deal, according to Tesla CEO Elon Musk.
But despite planning two generations ahead, the company still doesn’t have a solution to bring the promised full autonomy to hardware that it’s been promising that capability to since 2016.
Earlier today, Samsung announced a 22.8 trillion won ($16.5 billion) deal that would run through 2033. In that filing, Samsung did not name the customer, only that it is a “large global company”. Later, Bloomberg reported that the customer is Tesla, and Musk confirmed this on twitter. Then in his usual bravado, he stated that the deal is “likely much more than that.”
Musk also stated that the chips will be made in Samsung’s facility in Taylor, Texas. Manufacturing is likely to start in 2026.
Samsung makes the chips for the self-driving computers in Tesla’s current vehicles, but the next generation will be made by TSMC, first in Taiwan and then later in Arizona. Then the next-next generation will be covered by this new Samsung deal.
The new deal is significant due to TSMC’s global dominance of chipmaking. Samsung has had significant unused capacity, so the Tesla deal is a big boost for the company’s chip foundry business.
Tesla has gone through several generations of chips, previous referred to as “HW,” standing for “hardware,” with a number indicating their generation. More recently, Tesla started referring to its chips with “AI” instead of “HW,” in order to incorporate the tech buzzword du jour.
Currently Tesla is on HW4/AI4, and TSMC will make HW5, then Samsung will make HW6 again.
These generations of hardware each get successively more capable, and can handle more data and thus theoretically become better at self-driving tasks.
Current Tesla HW4 vehicles cannot drive themselves, and are only capable of SAE level 2 operation, which requires an attentive driver behind the steering wheel (though Tesla’s solution does work better than most others). Tesla’s ‘Robotaxi’ system is currently operating in Austin without anyone in the driver’s seat, but has a “safety rider” who can take control of the vehicle, blurring the line somewhat on which SAE level it is operating at.
But what about HW3?
There’s a problem with the differentiation between these generations of hardware: ever since 2016, when Tesla was on version 2 of its hardware, it has promised full self-driving capability on all of its vehicles.
This was announced in a blog post on October 19, 2016, which has since been deleted from Tesla’s website but is still available through archive.org.
Tesla stated, at the time, that every single Tesla vehicle produced after that date had the hardware that would allow for full self-driving.
It eventually became apparent that HW2 would not be capable of full self-driving tasks, and Tesla upgraded to HW3, promising all HW2 customers that they would get a free upgrade to HW3 if they bought Tesla’s Full Self-Driving system, which has varied in price over time but once cost $15,000.
However, Tesla still tried to charge owners $1,500 for that hardware upgrade, even though Tesla sold cars claiming that they had all the hardware needed for full self-driving.
One owner had to take Tesla to court to get them to deliver on this promise, and Tesla is still charging $1,000 for this hardware owners already bought. And that’s not the only one, there are a number of other self-driving false advertising cases that have gone to court, arbitration, or reached a settlement.
Now, with the change from HW3 to HW4, we’re seeing indications of a similar run-around.
We’ve already seen differing FSD software versions based on which hardware level vehicles have, with HW3 vehicles getting updates later than HW4 vehicles do. On last week’s Q2 earnings call, Tesla CFO Vaibhav Taneja said:
What we want to do is get unsupervised done on hardware four first. Once it’s done, then we’ll go back and look at what we need to do with the hardware three cars. Like I said, the focus is first to get unsupervised out and then we’ll go back and see what more work we need to do.
“Unsupervised” is Tesla’s new name for actual full self-driving, which would allow a vehicle to drive without the supervision of someone in the driver’s seat. This as opposed to “supervised FSD,” a phrase Tesla started using after about a decade of promising full self-driving without delivering it.
Here, Taneja said that HW3 cars will eventually get FSD, but Tesla hasn’t really figured out the path to that, and it’s focusing on new cars first, then will go back around to see what needs to happen.
Previously, Musk had stated that Tesla “will have to upgrade people’s hardware 3 computer,” but more recently it has become apparent that Tesla really doesn’t have a plan for that upgrade. And Taneja’s comments suggest that Tesla will still try to wedge FSD onto HW3, despite previously admitting that the system is not capable of it.
The existence of future HW5 and even HW6 chips also suggest that current systems are not capable of full self-driving. If HW4 is FSD-capable, then why would Tesla need two more generations of chip in the next two years in order to do the tasks that it promised all of its cars could do a full decade prior?
So, much more than having no solution for HW3 cars (or even HW2 cars, some of which have gotten free upgrades, but others who have been charged $1,000 to upgrade to a computer they already paid for), does this mean that Tesla is going to kick the can further down the road, and eventually have no solution for HW4 and HW5 either?
And, when will we know about these solutions? Tesla has sold millions of vehicles with the promise of self-driving which will seemingly need an upgrade at some point. And many of those vehicles are old enough, at this point, to be retired, despite spending up to $15,000 on a piece of software that has never been delivered to them.
An HW6/AI6 computer will surely have all sorts of new whizbang capabilities, but we were promised those capabilities years ago, and they’re still not delivered yet.
The 30% federal solar tax credit is ending this year. If you’ve ever considered going solar, now’s the time to act. To make sure you find a trusted, reliable solar installer near you that offers competitive pricing, check out EnergySage, a free service that makes it easy for you to go solar. It has hundreds of pre-vetted solar installers competing for your business, ensuring you get high-quality solutions and save 20-30% compared to going it alone. Plus, it’s free to use, and you won’t get sales calls until you select an installer and share your phone number with them.
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Mark Kay’s iconic Pink Cadillac awards are driving into the future for 2025. The company’s first-ever electric Pink Cadillac OPTIQ made its debut during the Mary Kay annual Seminar in Charlotte this weekend, symbolizing a “recharged vision” for the future of the popular brand.
Pioneers in monetizing friendships female empowerment and entrepreneurship, the Pink Cadillac is considered one the most coveted symbols of achievement for Mary Kay sales reps, signifying not just great sales (GM Authority reported that it took ~$102,000 in annual sales to qualify back in 2001), but also leadership, a history of mentoring others, and a sustained reputation of excellence among their peers.
The women you see behind the wheel of the Pink Cadillac are the real deal, in other words, and the big Caddy really does mean something to people in the know.
The iconic pink Cadillac was born in 1968 when Mary Kay Ash purchased a Cadillac Coupe De Ville from a Dallas dealership and promptly had it painted to match the pale pink Mary Kay lip and eye palette. General Motors later named the color Mary Kay Pink Pearl, and the shade is exclusive to Mary Kay.
MARY KAY
Now, the Pink Cadillac is going to stand for environmental sustainability, too, enabling Mary Kay’s top performers to set yet another positive example for anyone aspiring to their success.
“For decades, the Mary Kay pink Cadillac has symbolized accomplishment, aspiration, and the power of recognition,” said Ryan Rogers, Chief Executive Officer of Mary Kay. “With the introduction of the all-electric OPTIQ, we’re honoring that iconic legacy while driving into a transformative future—one grounded in our commitment to sustainability and dedication to inspiring and celebrating the achievements of our independent sales force for generations to come.”
Mary Kay announced its new Pink Cadillac with this video, below.
Same Legacy, New Energy
“The legacy continues with the new, all-electric (and still very pink) Cadillac Otiq [sic],” reads the official Mary Kay copy on YouTube. “The Optiq remains instantly recognizable with the pink pearl exterior, while modernizing with sleek, cutting-edge features. In addition, this vehicle showcases our commitment and dedication to sustainability by reducing our carbon footprint while continuing to inspire.”
Speaking of inspiration, I can’t hardly hear the words “Pink Cadillac” without thinking of the song. But, since “Bruce Springsteen” has become something of a trigger word for the MAGA snowflakes in the audience, I’ll post a different, but similarly great song about rose-tinted GM flagships from Dope Lemon. You can let me know what you think of it in the comments.
As ever, the Cadillac is not a “gift,” per se – but typically takes the form of a two year lease paid for by Mary Kay. No word yet on what the exact shape and form the OPTIQ deal will take.
Electrek’s Take
Whatever you might think of MLMs or businesses like Amway, Avon, or Mary Kay, they play a big part in the social dramas of hundreds (if not thousands) of neighborhoods and online communities. The people at the top are influential, and the people “below” them genuinely try to emulate them and follow their lead.
Thanks to Mary Kay, that might soon mean a decision to buy an electric vehicle – and that result would be a win for everyone.
SOURCE | IMAGES: Mary Kay.
If you’re considering going solar, it’s always a good idea to get quotes from a few installers. To make sure you find a trusted, reliable solar installer near you that offers competitive pricing, check out EnergySage, a free service that makes it easy for you to go solar. It has hundreds of pre-vetted solar installers competing for your business, ensuring you get high-quality solutions and save 20-30% compared to going it alone. Plus, it’s free to use, and you won’t get sales calls until you select an installer and share your phone number with them.
Your personalized solar quotes are easy to compare online and you’ll get access to unbiased Energy Advisors to help you every step of the way. Get started here.
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