US bitcoin miners are increasing their cryptocurrency holdings to prepare for tougher market conditions, as competition for resources grows. Notable companies like Marathon Holdings, Riot Platforms, and CleanSpark have taken advantage of the recent spike in Bitcoin prices, which reached $100,000 last month, raising over $3.7 billion from investors since November. They have utilized these funds to acquire more coins, often through zero or low-coupon convertible notes.
This surge in activity follows the election of Donald Trump, who assured that Bitcoin would be “mined, minted, and made in the USA.” However, for many miners, the rush to buy more Bitcoin is a strategic move to shield themselves from rising energy costs.
Russell Cann, the chief development officer at Core Scientific, noted that the situation is complicated: “It’s not as easy as just seeing the price of Bitcoin go up and being satisfied; there are still many challenges regarding profitability and energy access.”
The shift in strategy comes as miners adapt their operations, including increasing their investment in artificial intelligence. This marks a notable change for the industry, which faced significant struggles over the past year following a halving of the rewards miners receive.
Miners play a crucial role in maintaining the Bitcoin network by validating blocks of transactions. The network’s design allows for the mining reward to halve every four years, and the latest adjustment in April reduced daily rewards from 900 to 450 coins.
CoinShares, an investment group, pointed out that the average cost to mine one Bitcoin for US-listed miners rose to $55,950 during the third quarter, a 13% increase from the previous quarter. When accounting for depreciation and stock-based compensation, the overall cost reached about $106,000, while Bitcoin recently traded around $102,175.
James Butterfill from CoinShares commented that without a price increase, many miners might have been forced to shut down their operations. Fortunately, rising Bitcoin prices have provided a boost to mining profitability, encouraging many miners to seek fresh funding.
Companies like Marathon and Riot are following the example of MicroStrategy, which has successfully issued long-term convertible bonds to fund Bitcoin purchases. This trend is evident as miners prioritize making Bitcoin their reserve asset and planning to hold onto newly mined coins.
Fred Thiel, CEO of Marathon Holdings, emphasized the renewed focus on Bitcoin accumulation, stating, “Our business model now is to accumulate as much Bitcoin as we can.” The company has amassed nearly 45,000 Bitcoins, worth over $4.4 billion.
Despite significant investments in Bitcoin, miners are still under pressure as competition increases. The collective computing power, or hash rate, necessary to secure the Bitcoin network has soared, reaching record levels recently. This growth could potentially counter the benefits of rising Bitcoin prices, putting further strain on profits.
The US mining sector also faces intense competition for energy resources. The US Energy Information Agency has estimated that Bitcoin mining may account for 2.3% of the country’s energy grid, though predictions can vary due to limited data.
Regulators in Texas have begun requiring larger data centers to report their energy consumption, with projections indicating a 60% increase in energy demand from large users by 2025. Executives are particularly wary of competition from AI developers, who often wield greater financial resources.
Cann of Core Scientific noted, “The demand for artificial intelligence in the US is going to significantly impact Bitcoin mining’s access to energy.” He predicts that a larger percentage of Bitcoin mining computing power may eventually operate outside the US.
To adapt, Marathon plans to relocate half of its mining operations by 2028, focusing on countries with surplus energy like Kenya, the UAE, and Paraguay. Meanwhile, other firms are looking to capitalize on the rising demand for AI. Firms like Hut 8, Core Scientific, and Hive have begun leasing their data center capacities to artificial intelligence companies.
As Zach Bradford, CEO of CleanSpark, pointed out, even with rising Bitcoin prices, the industry remains vulnerable: “Yes, Bitcoin’s up, and it helps, but if energy prices spike tomorrow, it can still be a difficult day for Bitcoin miners.”