Now that spot Bitcoin exchange-traded funds (ETFs) have been launched in the U.S. market, the next big event on the horizon for Bitcoin is the halving that is expected to take place in April. This means that crypto mining is a hot topic in the crypto space at the moment.
Swan Bitcoin has expanded its operations into Bitcoin mining with the launch of Swan Mining, already achieving great success by mining 750 Bitcoin and reaching a hash rate capacity of 4.5 EH/s. However, the Bitcoin mining industry is facing challenges, especially concerning profitability after the upcoming Bitcoin halving event, which is predicted to put financial pressure on major miners. Meanwhile, the global power demand, especially from crypto mining, is highlighted in the IEA's latest report, pointing to a big increase in energy consumption from the digital space.
Swan Bitcoin Dives into Mining Operations
Swan Bitcoin, a company focused on Bitcoin financial services, recently announced the launch of its new Bitcoin mining venture, Swan Mining, which began operations in stealth mode last summer. The venture already achieved great success, mining 750 Bitcoin with a current hash rate capacity of 4.5 exahashes per second (EH/s). This capacity is expected to surge to over 8 EH/s with the deployment of new mining equipment scheduled for March.
The creation of Swan Mining aligns with the company's strategy to develop a much more comprehensive suite of Bitcoin-related services. Swan Mining operates without leveraging debt and maintains a separate balance sheet from Swan Bitcoin's other business segments.
In line with its expansion plans, Swan Bitcoin is preparing for a public listing within the next year. The company plans to allocate its upcoming Series C funding evenly across its financial services, mining operations, and acquisitions.
Rapha Zagury, the Chief Investment Officer and head of Swan Mining, explained that the stealth mode operation was chosen to prevent disruptions in the pricing of ASIC miners, which is a crucial component of Bitcoin mining infrastructure. Furthermore, Swan Mining is collaborating with a number of industry partners to support financial initiatives, including capital raises and balance sheet restructurings, which are expected to bring huge benefits to all involved parties.
Despite its ventures into mining, Swan Bitcoin assured its customers that its financial services division remains robust and is still experiencing growth. This is evident in the fact that over the past year, the company reported $125 million in revenue and has doubled its staff.
Mining Profitability at Risk Post-Halving
Unfortunately, not all of the mining news is good news. Analysts at financial services firm Cantor Fitzgerald have raised concerns about the profitability of major publicly traded Bitcoin miners after the upcoming Bitcoin halving event. In research highlighted by CleanSpark executive chairman Matthew Shultz, it was found that companies like Marathon Digital, Riot Platforms, and Core Scientific could face increased financial pressure as the rewards they receive for mining Bitcoin might not cover their operational costs.
The halving, scheduled for April, will reduce the mining rewards by half, potentially affecting miners with high operational expenses. At current Bitcoin prices, UK-based Argo Blockchain and Florida's Hut 8 Mining are among those predicted to be most impacted, with their "all in" cost-per-coin exceeding the market price of Bitcoin.
Despite these challenges, some miners, including Bitdeer in Singapore and CleanSpark in the US, are still expected to stay profitable under the assumption that BTC's price averages around $40,000 and hash rates remain stable. These firms usually manage to keep their operational costs low enough to sustain profitability even when mining rewards are reduced.
To mitigate the risks associated with Bitcoin's price volatility, some miners, according to Luxor's associate director of derivatives Dan Rosen, use various hedging strategies. These include purchasing derivatives like hash rate futures and BTC-related options to stabilize possible income fluctuations.
The halving event, which could be potentially bullish for Bitcoin's price in the long term due to reduced supply, still poses immediate challenges for miners. Only time will tell if the anticipated post-halving BTC price increase will actually materialize to offer relief to miners.
Crypto's Growing Footprint in Global Power Demand
Meanwhile, the International Energy Agency (IEA) recently shed light on the dynamic shifts within the global electricity market. According to the IEA's 2024 report, which offers projections up to 2026, the electricity sector, despite being the largest contributor to CO2 emissions worldwide, is at the forefront of the transition towards net-zero emissions. The report also optimistically notes that renewable energy sources are expected to become the primary means of power generation by 2025.
After a slight decrease in growth from 2.4% in 2022 to 2.2% in 2023, power consumption is anticipated to climb to 3.4% through 2026, with big contributions from China and India. However, a stark increase in energy demand is specifically expected from the digital realm, particularly from data centers, artificial intelligence (AI), and crypto mining, which together could see their consumption more than double, surpassing 1,000 terawatt-hours.
AI, and specifically platforms like ChatGPT, are expected to become the largest energy consumers in this sector. The report estimates a tenfold increase in AI's power usage between 2023 and 2026, with ChatGPT alone projected to use almost 10 TWh per year during this time. This consumption rate dwarfs that of traditional internet searches, with a single ChatGPT inquiry using almost ten times the energy of a Google search.
Cryptocurrency mining, particularly Bitcoin, is another big energy consumer, having used 120 TWh in 2023, with a forecasted increase to 160 TWh by 2026. However, the overall energy footprint of crypto mining is still only a small fraction of global consumption.
On a more positive note, the report also touches on the sustainability of Bitcoin mining, and noted that 54.5% of its energy comes from sustainable sources. This sector is experiencing a surge in activity as the Bitcoin halving approaches, with many miners investing in new, possibly more energy-efficient, equipment.
