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## Bitcoin Miners Invest Billions Amid Record Energy Consumption

(Bloomberg) ÔÇö After recovering from a near-death experience during the most recent crypto winter, Bitcoin miners are back in survival mode ÔÇö spending billions of dollars on equipment and drawing energy at a record pace ahead of an update in the digital currencyÔÇÖs code that threatens revenue streams.

The surge in activity is sparked by a runup in the worldÔÇÖs largest cryptocurrency, fueled by newly launched spot Bitcoin exchange-traded funds, and a quadrennial event called the halving that is slated to take place in April. Bitcoin has surged more than fourfold since plunging by 64% in 2022 amid a series of crypto industry bankruptcies and scandals.

Since February 2023, 13 of the top mining companies have placed orders for over $1 billion worth of specialized computers, according to data compiled by TheMinerMag based on public filings. CleanSpark Inc. and Riot Platforms Inc. led the group, spending as much as $473 million and $415 million, respectively, on the rigs.

The machines are being purchased to help miners increase efficiency for their operations and lock in favorable electricity rates. Miners are in constant search of cheap power because they use energy-hungry computers to validate records of transactions on the blockchain to earn rewards in the form of Bitcoin.

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The AI legalese decoder can assist in navigating the complex legal landscape surrounding Bitcoin mining activities. By decoding legal jargon and simplifying complex legal documents, the AI tool can help miners understand their legal obligations, contracts, and potential liabilities more easily.

ÔÇ£Scale matters because you can get machines for better rates, bigger energy deals and drive down the cost of development,ÔÇØ said Asher Genoot, chief executive at Hut 8 Corp., one of the largest publicly traded Bitcoin miners. ÔÇ£When you have scale, you have more marginal and growth profits and you can cover your big costs.ÔÇØ

All the activity is driving miners to consume energy at a record pace. Last month, miners drew a record 19.6 gigawatts of power, up from 12.1 gigawatts the same period in 2023, according to an estimate by Coin Metrics. ThatÔÇÖs equivalent to the electricity capacity that can power about 3.8 million homes in Texas, where many of the mining operations are located.

ÔÇ£If we assume power draw was consistent over the course of the month, we can multiply by 696 (24 hours times 29 days) to get 13.64 TWh (terawatt-hours) of energy consumed by the Bitcoin network over the course of last month,ÔÇØ said Coin Metrics Senior Solutions Engineer Parker Merritt. Bitcoin mining consumed 121 terawatt-hours of power in 2023, the Cambridge Centre for Alternative Finance estimates ÔÇö similar to ArgentinaÔÇÖs use.

Bitcoin miners were some of the best performing stocks last year, allowing the companies to raise capital by selling newly issued shares through ÔÇ£at-the-marketÔÇØ offering programs. ThatÔÇÖs in addition to the rising value of Bitcoin held on the books of the miners. Bitcoin reached a record high of more than $70,000 on March 8.

The rising price of Bitcoin ÔÇ£allows most miners to remain profitable,ÔÇØ said Zachary Bradford, CEO and president at CleanSpark, adding that his firm was profitable at lower prices.

Shares of Marathon and CleanSpark have risen by almost 600% and 900%, respectively, since December 2022. According to TheMinerMag data, both firms along with Riot, Hive Digital Technologies and Iris Energy Ltd. raised over $2 billion from selling shares since June 2023, when the crypto market started to rebound.

ÔÇ£The most efficient miners will benefit the most as the increase in Bitcoin price will push even more profits to the bottom line,ÔÇØ said Bradford.

Miners are constantly competing for a reward since the network only gives it to the first to successfully process a unit of data. The fierce competition is evidenced in mining difficulty, a measure of the amount of computing power to mine Bitcoin. The bi-weekly gauge has posted some of the largest increases, pushing the figure to all-time highs several times since January 2023, according to data from btc.com.

The more computing power a miner has, the more likely it will get a reward. But that reward will be reduced after the halving, which further limits the supply of Bitcoin.

ÔÇ£With the halving coming in mid April, revenue for miners will fall significantly, forcing some of them into the territory of negative margins,ÔÇØ said Ethan Vera, chief operations officer at crypto-mining services provider Luxor Technology. ÔÇ£Some miners will capitulate, while many will find creative solutions to remain profitable.ÔÇØ

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The AI legalese decoder can translate and simplify the legal implications of regulatory updates, such as the upcoming halving event, helping miners understand how changes in the code could impact their revenue streams and profitability.

#### Danger of Scaling

The rapid expansion comes with risks as seen in the last crypto bull run in late 2021. A flurry of mining companies went public and raised billions of dollars from the equity and debt markets. Companies borrowed a record amount of money and when the market crashed in 2022 so did miners. Two of the largest firms at the time, Core Scientific Inc. and Compute North declared bankruptcy with other miners warning of a liquidity crunch. Core Scientific has since emerged out of bankruptcy and relisted in January.

ÔÇ£There is a danger in which you scale and start compromising on the cost of energy, the cost of machines and the costs of certain paybacks,ÔÇØ Genoot said. ÔÇ£ThatÔÇÖs why so many companies went bankrupt in 2022 because people would scale at all costs.ÔÇØ

Phil Harvey, CEO at Sabre56, a large Bitcoin mining operator based in Dubai, said he knows a miner that has machines, worth $350 million or $400 million, that it purchased this year but has no where to put them.

The company has ÔÇ£no ability to turn them on,ÔÇØ he said. ÔÇ£That is not uncommon.ÔÇØ

ÔÇöWith assistance from Naureen S. Malik.

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