How Bitcoin Mining Has Changed Since the Last Halving

Every four years, we experience a bonus day in February, the United States elects a president (ideally one supportive of Bitcoin), the Olympics take place, and we witness a significant event called the Bitcoin halving.

In the grand scheme of things, four years may seem relatively short. However, in the realm of Bitcoin mining, where changes in the geographical landscape, hash rate growth, and industry efficiency are big factors, a lot has occurred since the previous halving event.

This feature is part of CoinDesk’s “Future of Bitcoin” package published to coincide with the fourth Bitcoin “halving” in April 2024. Amanda Fabiano, former head of mining at Galaxy Digital, is the founder of Fabiano Consulting, which assists the Bitcoin mining industry in accomplishing its goals.

In 2020, we experienced the last halving during the height of the COVID lockdown, when many of my mining friends celebrated this epic occasion from afar, with hopes of celebrating IRL in four years.

At that time, the price of Bitcoin hovered around $8,700, while the hash rate stood at approximately 120 EH/s. The majority of the hash rate was concentrated in China, and rumors regarding the possibility of a Chinese ban were merely rumors.

Today, we’re nearing the upcoming halving, with Bitcoin price and hash rate reaching unprecedented levels. It’s challenging to envision the landscape for the next halving in 2028.

Since the last halving, the exodus of China miners drastically changed the mining landscape. Miners have sought refuge in jurisdictions offering hospitality or opportunities for energy arbitrage, which became a pivotal metric for success. Several nation states, such as Bhutan, El Salvador, and even Venezuela for a short period, not only embraced miners but also devised strategies to set up mining operations themselves. Not all places that opened their arms to miners ended up being great locations, including Quebec, Canada and Kazakhstan.

Read more: Bitcoin Halving Is a ‘Show Me the Money’ Moment for Miners

Texas emerged as a dominant mining hub, while Latin America and the Middle East saw growing interest and involvement in the mining sector.

Going forward, the surge in hash rate across the Middle East and Africa will continue and, based on announcements from the U.S.-listed companies, there is likely to be an increase of hash rate across North America. Miners will follow the cheapest forms of energy in jurisdictions that are economical and collaborative.

Maybe we will even experience hash rate seasonality again–this round unfolding in ERCOT markets versus rainy seasons in China.

Another major trend over the past cycle was the increase in institutional adoption. The long-awaited approval of Bitcoin ETFs in the U.S. played a significant role in legitimizing Bitcoin as an asset class within mainstream financial markets. The ETFs provided institutional investors with a regulated and accessible avenue to invest in Bitcoin, thereby forcing regulatory authorities and traditional financial institutions to seriously take a look at Bitcoin. While the ETF was having its moment, we can’t forget that public miners were there for institutional investors to invest in as an alternative to holding Bitcoin.

Over the last four years, the proliferation of public miners has been massive.

In 2020, there were only two public miners listed on the NASDAQ. By 2024, it’s hard to keep track of how many public miners there are across multiple exchanges across the world, with the NASDAQ being the dominant boasting at least 25 public miners.

The increase in miners publicly reporting their operations metrics to the markets shed light on issues, such as ASIC costs, hash rate expansion, operational challenges and cost to mine. Additionally, it facilitated an understanding of macro trends like global hash rate distribution, while providing analysts the ability to have a more methodical understanding of the overall cost curve of mining. Keep in mind that the public miners still account for around one-third of the overall network.

Unfortunately, while public companies enabled analysts to provide better coverage, this transparency also introduced greater complexity for analysts operating in the field since there are not standardized metrics. For instance, among a sample of eight public miners, a total of twenty different metrics are disclosed, some where the inputs don’t match.

The absence of standardized basic metrics complicates comparing one miner to another and providing comprehensive coverage. Miners have very different strategies: some host, some own infrastructure and provide services, some have PPA that allow for massive power revenue but lower Bitcoin production, some are working on different forms of compute. How do we bucket everyone as a Bitcoin miner while discounting their strategies?

Going forward, two main focus areas that will become increasingly important for miners–SG&A costs & operational excellence. Tying standardized metrics to miners will increase the next wave of transparency for investors to be able to properly evaluate which miner is their top pick. Hopefully we will see that emerge in this cycle.

Luckily, mining facilities now have a broader array of options for operational excellence—we have witnessed numerous mining support companies expand their service offerings to include firmware and fleet management solutions. These solutions provide adaptable logic that accommodates various mining strategies.

What does the rise in institutional adoption mean for private miners and the small guys? Raising capital for mining remains challenging, primarily due to the upfront capital requirements. Despite the current shift towards a bullish market which usually redefines risk management, the accessibility of options such as ETFs and public mining companies diminishes the appeal of investing in private miners. The lack of liquidity and the concentration of risk solely on operations deter potential investors.

The game is no longer about being on the low end of the cost curve, a miner must be on the low end of the cost curve and not only have access to capital but a low cost of capital.

However, there are always exceptions and there are some resilient and gritty builders in the mining industry. Private miners with exceptional growth strategies during bear markets as well as energy companies exploring alternative energy sources stand out as promising prospects worth monitoring. Additionally, because of the increased legitimacy of Bitcoin with the ETF, we might just see larger energy companies regain trust and be more open this cycle.

As block subsidies become scarcer, the importance of strategy and economies of scale intensifies, leading us to an increased activity in M&A. The landscape of miners, both public and private, might look very different in one year’s time. This trend began during the last bear market as some miners confronted challenging financial circumstances that others could scoop up. Additionally, this strategy acted as a response to a change in miners’ tolerance for counterparty risk. The previous cycle provided valuable lessons for the whole industry on counterparty risk.

M&A isn’t the only solution miner’s have turned to. We have seen the shift begin in the last cycle for a diversification in revenue, some shifting to positioning as energy companies or shifting to offer compute solutions. Vertical integration and diversification across business lines serve as crucial survival tactics for companies facing the harsh realities brought about by halving events.

Lastly, we can’t talk about the halving without thinking about the future state of revenue. With the launch of new L2 solutions for Bitcoin, the recent increase in network fees for miners have certainly been a welcome relief. This surge in activity has sparked both excitement and frustration within the industry.

The increase in fees helps a miner’s bottom lines. Miners are fundamentally profit-driven enterprises, particularly those publicly traded with shareholders, and their primary focus should remain on maximizing profitability, decreasing expenses and increasing operational excellence.

As we approach the mid-April halving, the landscape is so different from the lead-up to the previous event. Bitcoin’s price is flirting with all-time highs, and the hash rate has surpassed 600 EH/s. Four years–brief but unbelievably transformative. Maybe this time we will even see competition in the ASIC manufacturing business.