Bitcoin (BTC-USD) prices hold above $63,000 as the cryptocurrency gives ground on Monday. The bitcoin halving event is set to take place this Friday, April 19, and aims to reduce the amount of bitcoins available in circulation once every four years.
The bitcoin halving directly impacts the profits of bitcoin miners, including Riot Platforms (RIOT). Riot Platforms CEO Jason Les speaks with Yahoo Finance about Riot’s preparations for the halving and the “compelling” positive effects the crypto space is currently experiencing, despite the “challenging period of volatility” that halving will result.
“The price appreciation earlier this year following the approval of various Bitcoin ETFs, I think, has really helped to mitigate the negative impact of the halving on miners, because we have already seen benefits to “From this,” Les says, later adding: “Our value proposition to investors is that through our low electricity cost, we are effectively buying bitcoin at a lower price than its market price. We get leverage on bitcoin and we…expect to have more outsized returns. when the price of Bitcoin appreciates. »
Want to learn more about the Bitcoin halving? Watch this video from Yahoo Finance for a quick explanation: Halving Bitcoin: Explained
For more expert insights and the latest market action, click here to watch this full episode of Yahoo Finance.
This message was written by Luke Carberry Mogan.
Video transcription
[AUDIO LOGO]
JULIE HYMAN: Bitcoin is down today after a sharp weekend sell-off 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 has been about the upcoming halving. But first I want to ask you about the price, Jason, and kind of, you know, what you’re expecting here in the coming week. It’s a bit difficult to predict these days how Bitcoin will react to geopolitical events.
JASON LES: Yeah, it’s difficult. And I would even remove the second part, it is always difficult to predict how the price of bitcoin will react. I think the point is that there is a lot of trading and fast money moving in and out of Bitcoin all the time. And geopolitical events like those we witnessed this weekend can cause great short-term volatility.
If you zoom out and look at Bitcoin over the long term, you will see a very positive price trajectory up and to the right. And that’s because bitcoin is a sound currency, bitcoin has a fixed supply. And that attracts investors. And the halving of what we’re going to experience this Friday is part of that fixed supply in action.
JOSH LIPTON: And Jason, have you made any changes, pulled any levers in preparation for this halving of the company?
JASON LES: Preparing for the halving actually comes years before it happens. So I would say 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, that’s one of the lowest in the industry . And years ago, we started building a new facility that will be put into operation this month. This installation is therefore expanding. And this is where we deploy the latest, greatest and most efficient machines on the market.
So we prepared for this halving years ago. And the decisions we make today prepare us for the halving that will happen in four years, in 2028.
JULIE HYMAN: Jason, help us explain this. Because when the halving happens, the amount of bitcoins you will get from mining each bitcoin will be about half of what it is now. And there is a limit that is half of what it was in terms of how much bitcoin you can mine per day. How does that not just cut your income in half?
JASON LES: Well, that immediately cuts miners’ income in half. So it’s still a difficult period of volatility that we’re going through. But the fact is that if we look beyond previous halvings, we saw huge price appreciations in the 12 to 18 months following the halving. And in fact, in this case, this is a very unique circumstance, we saw Bitcoin hit a new all-time high before this even happened.
So the price appreciation earlier this year following the approval of various Bitcoin ETFs, I think, has really helped to mitigate the negative impact of the halving on miners, because we’ve already seen some benefits. But going forward, I think the effects that we’re seeing in ETFs in the market are really compelling. These ETFs, you put Grayscale Bitcoin Trust aside, we’ve seen net inflows of about $27 billion in the three months or so since these ETFs were approved. These ETFs now manage around half of the assets under management that gold has after almost 20 years of existence.
So I think there is a compelling investment thesis with Bitcoin. I think the global community sees that. And even though the halving from a Bitcoin block rewards perspective represents a halving of our rewards, I think we’re in a very optimistic scenario for price appreciation in the coming years.
JULIE HYMAN: Jason, what will be your… what will be the price of Bitcoin, for example, what will be your pause even in terms of the level of Bitcoin after the halving?
JASON LES: So, because we are focused on a very low cost of energy, we are preparing for periods of downturn in the bitcoin mining economy, such as what a halving might cause. If you look at the latest generation of Bitcoin mining hardware right now, these machines have a breakeven price of around $200 per megawatt hour. So when that happens, that amount is effectively cut in half, to $100 per megawatt hour. And in Riot’s case, our cost of electricity in 2023 was $22 per megawatt hour.
So even with the halving, we still have a healthy margin. But we remain optimistic about the future prospects of Bitcoin. This is why we hold so much Bitcoin on our balance sheet. And we think the mining economy will rebound after the halving in the next 12 or 18 months.
JOSH LIPTON: You know, Jason, your stocks hit a 52-week low today. That’s down about 40% so far this year. Is there any part of your story, Jason, that you think investors just don’t really appreciate?
JASON LES: I think this whole market is new. So I think through ETFs, institutions previously have another way to gain exposure to Bitcoin. So I think there’s a lot of money being spent on this situation and wondering why… I don’t know enough about mining to determine who’s going to be the winner and the loser on the other side. I just want to sit in Bitcoin and see how the halving goes 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 to investors is that with our low cost of electricity, we are effectively buying Bitcoin at a discount to its market price. We gain leverage on Bitcoin. And we expect greater returns when the price of Bitcoin appreciates.
So I think there is a temporary drop in Bitcoin mining stocks due to the halving. We saw something very similar in the previous halving. I think the beta of Bitcoin mining stocks to Bitcoin was very low until the halving in 2020, and then in the months after that, and then into 2021. This beta has increased significantly. And it was 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 taken out of Bitcoin mining stocks. And it’s sort of a matter of waiting and seeing who will perform better on the other side of the halving.
