Bitcoin The mining industry is entering a difficult period marked by increasing competition, growing energy demand and declining profits, according to Fred Thiel, CEO of MARA Holdings (MARA).
“Bitcoin mining is a zero-sum game,” Thiel said in an interview with CoinDesk. “As more people add capacity, it gets harder for everyone. Margins contract and the floor is your energy cost.”
Thiel painted a picture of a more mature and brutal industry, in which only miners with access to reliable, inexpensive energy – or new business models – will survive. Increasingly, he said, many mining companies are moving into adjacent areas, such as artificial intelligence or building high-performance computing (HPC) infrastructure. Others simply face competition from players deploying their own hardware at a lower cost, including large manufacturers and companies like Tether.
“You have equipment suppliers that run their own mining operations because customers aren’t buying as much equipment,” Thiel said. “The global hashrate keeps growing, which means everyone else’s margins keep shrinking.”
A difficult path to travel
Thiel warned that the situation for miners could become even more dire after the next bitcoin halving in 2028, when block rewards will be halved again – this time to just over 1.5 BTC. Unless transaction fees increase or the price of bitcoin increases, the economics of mining will become unsustainable for many.
“Bitcoin was designed with the idea that transaction fees would eventually replace the subsidy,” Thiel said. “But that hasn’t happened. If bitcoin doesn’t grow by 50% or more per year, the math becomes very difficult after 2028 – and even more difficult in 2032.”
Despite several short-term spikes, transaction fees on the Bitcoin network remain relatively low. Most recent fee increases, such as those caused by ordinals and enrollment, have not lasted long enough to replace block grants. Thiel said mining companies are watching for new trends, such as banks purchasing blocks of space in advance to secure settlement priority, that could change the dynamic – but nothing concrete has emerged.
In this environment, junior mining companies are under severe pressure. Large players are adapting by controlling energy sources and investing in private infrastructure for AI, while smaller operators could be forced out of business.
“Our strategy is to be in the lowest quartile in terms of cost of production,” Thiel said. “Because in a tight market, 75% of other companies have to close their doors before us. »
Looking ahead, Thiel expects the market to self-regulate as miners reach their profitability limits. But the threshold is increasing rapidly. “By 2028, you will either be a power producer, owned by a power producer, or partnered with a power producer,” he said.
“The days of being a miner connected to the network are numbered. »
