MARA Sounds Alarm: Grid-Reliant Miners Risk Collapse After 2028 Halving

Bitcoin miners tethered to traditional power grids face a survival crisis after the 2028 halving, MARA Holdings warned shareholders this week.

Mara Narrates Dire 2028 Halving Warning, Records Stellar Q4 Sales, Stock Soars 8%

At present, Bitcoin miners who are reliant on the power grid are on a fast track to survival in the aftermath of the 2028 halving, especially as they juggle increasing energy costs and a reduction in mining rewards, according to a note from MARA HOLDINGS (NYSE:MARA) to shareholders this week.

The note, which touched upon the survival difficulties faced by miners, stated that “many may not survive.”

MARA’s stock price went up by 8% in the post-market trading hours on Thursday. This came after the company announced record sales of $214.4 million in the fourth quarter, even as Bitcoin’s price dropped by 4.2% amid a midweek selloff.

Halving Will Bring More Pressure On Profit Margins, Says MARA

Highlighting the 2028 halving that will decrease block rewards by 50%, MARA noted that this will exert more pressure on miners operating with high levels of energy costs.

The company pointed out that those dependent on the power grid are already operating with slim profit margins and will struggle further with the anticipated increase in energy prices.

After the 2024 halving, we saw some miners pivoting into AI and high-performance computing (HPC) to diversify revenue streams and mitigate losses. However, MARA maintains that such pivots alone won’t be sufficient for survival in the long run.

“Differentiate or perish,” the letter warned, urging innovation beyond mere cost-cutting endeavors.

Record Q4 Sales & Unyielding Bitcoin Strategy

MARA attributes its stellar performance to a vertically integrated model that combines low-cost energy through self-ownership, hardware reactivation, and infrastructure control for maximum flexibility.

Recently, MARA has been expanding its data centre infrastructure sales, positioning itself as a “picks-and-shovels” provider for the burgeoning AI and mining industries.

“We control our future,” MARA stated, reporting a remarkable 207% year-over-year surge in EBITDA to $794.4 million. Its Bitcoin reserves also experienced a 197% increase to $4.6 billion, providing a cushion against market volatility.

But Good Things Come In Threes

The company also disclosed plans to sell a portion of its Bitcoin holdings to optimize its capital structure and fund strategic initiatives. Despite a slight decrease in hash rate from the previous quarter, MARA’s total capacity is set to rise further in 2024.

With an emphasis on a long-term strategy, MARA remains focused on its core strength: Bitcoin mining.

As the 2028 halving approaches, industry analysts are highlighting the crucial role of renewable energy in ensuring the survival of Bitcoin miners.

Miners who rely heavily on the power grid risk collapse as they face increasing energy costs and a reduction in mining rewards. In contrast, those with a focus on wind, solar, or hydropower will be better positioned to withstand these challenges.

Integration Key to Post-2028 Survival

Those pivoting to new revenue streams, like AI or HPC, are also making progress, but industry expert Ben Perkins from Bit Innovation pointed out that these pivots alone might not be enough.

“The miners who will survive are those thinking outside the box, not just cutting costs. We need something new, something that will truly differentiate them in a post-halving world.”

MARA’s strategy of combining low-cost energy through a Texas wind farm acquisition with an expansion of data centre infrastructure sales showcases this broader diversification.

While competitors like RIVER (NASDAQ:RVNR) have been swift in deploying new miners post-2024 halving, Perkins noted that the urgency isn’t new.

“Everyone knew about the 2024 halving impact, yet many were slow. Those lagging now in green energy will face the same reckoning. It’s a matter of adaptation or extinction.”

In a recent interview, MARA’s CEO, speaking on the Paychain podcast, touched upon the challenges faced by smaller mining firms.

Smaller miners, often operating with thinner margins and less diversified revenue streams, are bearing the brunt of the industry downturn.

Moreover, smaller miners are typically more sensitive to changes in Bitcoin price and hashrate, which could affect their ability to generate profit and stay afloat.

In a period of market stress, smaller miners may be forced to sell Bitcoin at a loss to cover operational costs, putting them at a disadvantage compared to larger miners with the capacity to hold onto their coins.

In the case of a prolonged bear market or significant price correction, smaller miners could face difficulties in securing new capital.

Despite the challenges, smaller miners are continuously innovating and seeking new opportunities to expand their operations and market share.

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