Publicly traded bitcoin (BTC) miners are on the verge of reaching a combined market cap of $40 billion, a significant milestone that reflects the rapid growth of the industry. This market cap has doubled in just seven months, fueled by the surge in bitcoin’s price to near six figures.
One of the major challenges facing bitcoin miners is generating revenue. The rewards they receive for validating blocks on the Bitcoin blockchain were halved in April, when the market cap was around $20 billion. Currently, only 450 bitcoins are mined each day, and fees paid to miners are at their lowest levels in the current cycle, standing at just 10 BTC ($946,000) on November 27th.
To overcome this challenge, miners must either diversify their revenue streams or find ways to produce bitcoin at a lower cost than the current market price, which is approximately $96,000. However, this task is becoming increasingly difficult as the mining difficulty is expected to increase by 3% in the coming days.
The mining difficulty, which measures the level of effort required to produce blocks on the blockchain, adjusts every 2016 blocks or approximately every two weeks. With the hashrate, or computational power needed for mining, surpassing 700 exahash per second (EH/s) for over a month, miners are facing higher costs and operational challenges.
In response to these challenges, many miners have started diversifying into industries such as AI and high-performance computing (HPC) to meet growing demand for hosting computing power. Companies like IREN and MARA Holdings have seen success in these ventures, with MARA increasing its bitcoin holdings to over 34,000 BTC by selling convertible notes.
Investors looking to gain exposure to publicly traded miners can consider the CoinShares Valkyrie Bitcoin Miners ETF, which has seen a 60% increase in share price year-to-date, although this underperforms bitcoin’s 113% growth. As the industry continues to evolve and adapt to changing market conditions, miners will need to innovate and diversify to remain competitive in the growing cryptocurrency market.