Bitcoin miners face survival test as halving: Bitfinex

The upcoming Bitcoin (BTC) halving in April 2024 and potential regulations pose an existential threat to independent Bitcoin miners already struggling to compete with large corporate mining operations, according to a Bitfinex report.

While publicly traded companies like Marathon Digital Holdings and Riot Blockchain have scaled rapidly thanks to Wall Street funding, smaller independent miners lack the capital to negotiate favorable energy deals or invest in cutting-edge mining hardware.

“For independent miners to remain viable, they will need to innovate and possibly collaborate,” Bitfinex analysts said in the report. “Mining pools, for instance, offer a way for smaller players to combine their computational power and share in the rewards.”

Focusing on niche markets not yet dominated by industrial-scale operations could also give independent miners breathing room. But their long-term sustainability likely hinges on “continuous innovation in mining technology and methodologies,” per the report.

As block rewards drop from 6.25 to 3.125 BTC per block this April, independent miners must slash costs or boost efficiency to stay profitable. Proposed US regulations that mandate carbon reductions could also increase operational expenses.

“This scenario paves the way for larger, publicly traded mining firms, which typically have greater capital reserves and resources to navigate regulatory landscapes, to dominate the industry,” Bitfinex analysts added.

The influx of Wall Street money has “significantly altered the incentive structure behind Bitcoin mining” in favor of corporate interests focused on shareholder returns over network security principles.