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Bitcoin halving and cryptocurrency mining: the CEO of Riot Platforms talks about it
Bitcoin (BTC-USD) prices remain above $63,000 as the cryptocurrency gives ground on Monday. THE bitcoin halving event will take place this Friday, April 19, and aims to reduce the amount of available bitcoin in circulation once every four years.
The bitcoin halving has a direct impact on the profits of bitcoin miners, including Riot platforms (REVOLT). Riot Platforms CEO Jason Les talks to Yahoo Finance about Riot’s preparations for the halving and the “compelling” positive effects the cryptocurrency sector is currently experiencing, despite any “period of volatility” the halving will bring.
“The price appreciation in the early part of this year following the approval of various bitcoin ETFs, I think, has really helped dampen the negative impact that the halving will have on miners because we’ve already seen some positives from this ,” Les says, later adding: “Our value proposition for investors is that, thanks to our low cost of energy, we are actually buying bitcoin at a discount to its market price. We are getting leverage on bitcoin and. ..we expect to have more outsized returns” as the price of bitcoin appreciates.”
Want to know more about Bitcoin halving? Check out this video from Yahoo Finance for a quick explanation: Bitcoin Halving: Explained
For more expert insights and the latest market action, click Here to watch the full episode on Yahoo Finance.
This post was written by Luke Carberry Mogan.
Video transcription
[AUDIO LOGO]
JULIE HYMAN: Bitcoin lower today after heavy selling over the weekend following Iran’s attack on Israel. Joining us now is Jason Les, CEO of Riot Platforms, a bitcoin mining company. And I know all the talk in the bitcoin mining world was about the upcoming halving. But first I want to ask you about the price, Jason, and kind of, you know, what you expect here next week. It’s a little difficult to predict these days how bitcoin will react to geopolitical events.
JASON LES: Yes, it’s difficult. And I would also remove the second part, it is always difficult to predict how the price of bitcoin will react. I think the fact is that there is a lot of trading and fast money in and out of bitcoin at all times. And geopolitical events like the one we witnessed over the weekend can cause a lot of short-term volatility.
If you zoom out and look at bitcoin long-term, however, there is a very positive trajectory in price up and to the right. And this is because bitcoin is a hard currency, bitcoin has a fixed supply. And this is interesting for investors. And the halving we will experience this Friday is part of that fixed supply in action.
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JOSH LIPTON: And Jason, have you made any changes, moved any levers in any way in preparation for the halving of the business?
JASON LES: The preparation for the halving actually came years before it happened. So I would say that Riot prepared for this halving by focusing on a very low energy cost in 2023. We had an energy cost of 2.2 cents per kilowatt hour, one of the lowest in the industry. And years ago we started building a new facility that will be operational this month. So this structure is expanding. And this is where we implement the latest, best and most efficient machines on the market.
So we prepared for this halving years ago. And the decisions we make today are preparing us for the halving that will happen in four years, in 2028.
JULIE HYMAN: Jason, help explain this to us. Because when the halving happens, the amount of bitcoins you will get for mining each bitcoin will be about half of what it is now. And there is a limit that is half of the previous one in terms of the amount of bitcoin you can mine per day. How does this not just cut your income in half?
JASON LES: Well, it immediately cuts the revenue for the miners in half. So what we go through is always a difficult period of volatility. But the fact is that if you look beyond some previous halvings, we saw huge price increases in the 12 to 18 months following the halving. And indeed, this case is a very unique circumstance, we saw Bitcoin reach a new all-time high even before this happened.
So, I think, the price appreciation in the early part of this year following the approval of various bitcoin ETFs, has really helped to dampen the negative impact that the halving will have on miners, because we’ve already seen some aspects of it positive. But going forward, I think the effects that we’re seeing from ETFs in the market are going to be really compelling. These ETFs, let’s put aside the Grayscale Bitcoin Trust, we’ve seen net inflows of about $27 billion in the three months or so since these ETFs were approved. These ETFs now manage about half of the assets under management in gold, which has been around for almost 20 years.
So I think there is a compelling investment thesis with bitcoin. I think the world community is seeing this. And while the halving from a bitcoin block reward perspective is a cut in half of our rewards, I think we’re in a very bullish scenario for price appreciation in the years to come here.
JULIE HYMAN: Jason, what will be your… what will the price of bitcoin be, like what is your breakeven when it comes to the level of bitcoin after the halving?
JASON LES: So because we’re focused on such a low cost of energy, we’re prepared for downturns in the bitcoin mining economy, like the one that might have a halving. If you look at the latest generation bitcoin mining hardware right now, those machines have a breakeven price of around $200 per megawatt hour. So when the have occurs, the cost is effectively cut in half to $100 per megawatt hour. And in Riot’s case, our cost of energy in 2023 was $22 per megawatt hour.
So even with the halving, we still have a good margin here. But we are still optimistic about bitcoin’s future prospects. This is why we hold so much Bitcoin on our balance sheet. And we believe that the mining economy will recover after the halving in the next 12, 18 months.
JOSH LIPTON: You know, Jason, your stock hit a 52-week low today. This year it is down about 40%. Is there a part of your story, Jason, that you think investors really don’t appreciate?
JASON LES: I think the whole market is new. So I think because of ETFs, institutions first have another vehicle to get exposure to Bitcoin. So I think a lot of money looks at this having and thinks, hey, why – I don’t know enough about mining to pick who’s going to be the winner and loser on the other side of this. I just want to sit in Bitcoin and see how the halving plays out and see how the miners behave after the halving.
So I think that’s one of the main reasons why we’ve seen poor stock performance across the entire bitcoin mining sector. I think our value proposition for investors is that, thanks to our low cost of energy, we are actually buying bitcoin at a discount to its market price. We are getting leverage on bitcoin. And we expect to have more extraordinary returns as the price of bitcoin appreciates.
So I think there is a temporary crash in Bitcoin mining stocks due to the halving. We saw something very similar in the previous halving. I believe the beta from bitcoin mining stocks to bitcoin was very low leading up to the halving in 2020 and then in the following months and then continuing into 2021. That beta has increased significantly. And it’s been a huge bull market for all of us.
So the short answer is: I think there is money, money is, a lot of money is being mined from Bitcoin mining stocks. And it’s kind of a wait and see who’s going to be the strong performer on the other side of the halving.