The Bitcoin network saw its 20 million BTC mined this week, leaving only 1 million coins to reward miners.
The move has crypto industry watchers predicting rapid change Bitcoin Weighing the economics of the changing landscape against the expectations of the mining industry, and Bitcoin’s performance as an investment.
Mining companies help to save Bitcoin network and verify transactions, spending large amounts of energy competing to solve cryptographic puzzles in exchange for transaction fees and newly created bitcoins as rewards. It took 16 years to mine 20 million coins from Bitcoin’s inception, but nearly 115 years to unlock the rest of the supply, according to Wolfie Zhao, head of research. TheEnergyMag.
This does not mean that the Bitcoin mining industry will look that way for the next century. John Todaro, managing director and senior research analyst at Needham & Company, expects most publicly traded miners to exit bitcoin mining in 2027 and 2028.
“We believe that a large portion of public Bitcoin miners will sell almost all of their Bitcoin holdings by the end of 2026 as they incur (capital expenditures) related to AI workloads,” he wrote in a recent note shared with Decrypt. In other words, Bitcoin mining companies are driven by AI.
All of the publicly traded bitcoin miners the company covers have dedicated a portion of their computing power to high-performance computing, or HPC, and AI. This is a change that has been going on for years.
And it’s easy to see why, he added.
“The low hash rate combined with the next half of 2028 presents a worrisome environment for Bitcoin mining operations,” he said. Decrypt. “Most operators today are at or near breakeven costs, while NOI margins in HPC are north of 80%.”
Top Bitcoin mining pool operator Foundry is moving to Zcash
NOI refers to net operating income, which measures revenue minus operating expenses, excluding financial expenses and taxes. So it is for this reason that mining companies adjust their income distribution for optimal conditions.
said Ross Gann, chief communications officer at Bitdeer Decrypt The company has Bitcoin technical infrastructure in its DNA.
Bitdeer, a Singapore-based miner led by Bitmain co-founder Jihan Wu, is lighting a fork in the road facing the industry. Wu helped industrialize bitcoin mining in the first place – Bitmain, which he co-founded in 2013, once controlled nearly three-quarters of the global market for bitcoin mining chips. Now Bitdeer is converting many of its facilities to AI data centers while simultaneously developing its next-generation mining hardware.
“Miners who endure will be those who control most of the stack themselves. We are demonstrating how this matters by designing and deploying our own high-efficiency ASICs and securing long-term energy capacity around the world.” Gan said. “Vertical integration has proven to be one of the clearest markers of long-term survival.”
Bitcoin Miners ‘Sitting on Gold Mine’ as Demand for AI Rises: VanEck
He added that until recently, Bitcoin was treated as a key monetization engine complemented by AI infrastructure to maintain stable long-term earnings.
“This duality may not be any better in the future,” Gan said.
HIVE Digital Technologies, formerly HIVE Blockchain, was founded in 2017 and went public on the Toronto Stock Exchange later that year. The company began investing in high-performance computing, or HPC, infrastructure much earlier than many of its competitors. So early, in fact, that it was still generating revenue from Ethereum mining when CEO Frank Holmes mentioned it in an earnings call.
“The Ethereum mining margins we experienced during the quarter enabled us to continue to upgrade our data center assets in Sweden and Iceland and diversify our business by starting to invest in HPC assets,” he said in November 2021.
It wasn’t until a year later that Ethereum developers executed a merger, changing the network from a proof-of-work to a proof-of-stake consensus mechanism and making Ethereum mining obsolete.
The Canadian company has built its business around finding creative ways to source electricity from hydroelectric and other forms of electricity, Holmes said. Decrypt.
“Bitcoin mining has led the world in providing residual and surplus energy and building electricity infrastructure at scale,” he said. “There is an enormous abundance of energy in the world, especially in hydro-rich regions like South America and Canada, but the winners will be the operators who can secure it at low cost, structure around it intelligently, and turn that energy into sustainable computing infrastructure.”
Even as analysts, such as Todaro, predict that some bitcoin mining companies will begin to take off by the end of 2027, Holmes sees the challenge to become more efficient – the prediction for the middle of 2028 – before the next halving event.
Ethereum successfully executes a highly anticipated merger event, ushering in the Proof-of-Stake era
“Block rewards will go down, but that doesn’t mean the industry will disappear. It just means the bar is going up,” he added. “The miners that survive will be the ones with the best power, the best sites and the most flexibility.”
But what happens to the price of Bitcoin when block rewards reach zero? Investors know that Bitcoin has a limited supply since its inception, so theoretically it is priced in.
The most apt comparison comes from the Bitcoin white paper itself: “Constant additions (a constant amount) of new coins consume resources for gold miners to add gold,” BTC pseudonymous creator Satoshi Nakamoto wrote in 2008. Comparisons are widely accepted by Bitcoin like Fine, BlackRCE and Blackfine. Strategy founder Michael Seiler, and even Federal Reserve Chairman Jerome Powell.
The global supply of gold has not yet been exhausted, so investors cannot predict what BTC will do in 115 years ahead of a few chapters. But Todaro pointed out that the more gradual decline in block rewards should reduce the impact on Bitcoin’s price.
The strategy shorted $1.28 billion in Bitcoin, issuing $377 million in preferred shares
He expects most of the selling pressure to come from newly minted BTC, not long-term HODLers. And even if Bitcoin miners are liquidating their holdings when they go out of business, they’re not what they used to be.
“Bitcoin miners are not holding as many bitcoins on their balance sheets on a relative basis as they have historically,” he said. “They have ~0.5% of the circulating supply, while the strategy alone has 7x more BTC than all miners combined.”
