Bitcoin miners stockpile coins to ride out profit squeeze

financialpost.com:

U.S. bitcoin miners are accumulating war chests of the cryptocurrency to help them withstand tightening margins as competition for resources intensifies.

Companies including Mara Holdings Inc., Riot Platforms Inc. and CleanSpark Inc. have used the soaring price of bitcoin, which hit US$100,000 last month, to raise more than US$3.7 billion from investors since November, which they have then used to fund the purchase of the coins. They have often raised the funds through zero, or near-zero, coupon convertible notes.

Their moves come in the wake of Donald Trump‘s election victory, with the incoming U.S. president having promised that bitcoin would be “mined, minted and made in the USA.”

But for many, the headlong rush to buy more of the currency they are also mining comes down to protecting themselves against further financial pressure from high energy costs.

“It’s not as simple as the price of bitcoin has gone up and everyone’s happy,” said Russell Cann, chief development officer at Core Scientific Inc. “Complex challenges still remain around profitability and access to the grid.”

The miners’ ambitious plans, which also include expanding capacity for artificial intelligence (AI), mark a sharp reversal of outlook for the industry, which has struggled over the past eight months after the reward they receive for mining bitcoin halved.

Miners compete with each other to validate blocks of new transactions in bitcoin, making them a crucial link in ensuring the bitcoin network is secure and reliable.

The computer programs that run the bitcoin network are designed to halve the reward available to miners every four years. The latest, in April, cut the spoils on offer for miners from 900 to just 450 coins a day.

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