The Bitcoin (CRYPTO:BTC) halving event takes place every four years and was last completed in April 2024. But what is Bitcoin halving, and how does it impact investors and cryptocurrency mining companies?
Miners receive Bitcoin to verify and validate transactions on the blockchain network. The company can either hold these block rewards on its balance sheet or sell them to help it run its operations.
Now, the total amount of Bitcoin in circulation is limited to 21 million, which is initially distributed to miners over time. In 2009, miners were awarded 50 Bitcoins for each block of verification, and this number has since fallen by 50% every four years to 25 in 2012, 12.5 in 2016, 6.25 in 2020, and 3.125 in 2024.
Technically, the Bitcoin halving has no impact on the price of the digital asset. However, before each halving event, the cryptocurrency market experiences volatility as investors expect the demand and supply mismatch to drive prices higher. During each of the prior halving cycles, BTC prices surged six months before the halving event and 18 months after the event was completed.
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How does Bitcoin halving impact miners?
Mining Bitcoin is capital-intensive, as companies need to invest heavily in hardware and account for energy costs. Thus, it’s crucial for miners to weigh the payouts from BTC mining against these associated costs.
The Bitcoin halving leads to lower block rewards, which means mining rewards are cut by 50%, which has dragged share prices of mining companies lower in 2024. Typically, the performance of mining stocks is tied to Bitcoin prices. In 2024, BTC is up over 40%, but mining stocks are trailing the digital asset by a wide margin.
For instance, in the first four months of 2024, shares of Marathon Digital and Riot Blockchain are down 12% and 30%, respectively. BTC prices must recover for mining companies to deliver steady cash flows and profits after the halving.
This mining stock is on fire
While most crypto stocks are under the pump, one Bitcoin mining company that has bucked the trend is CleanSpark (NASDAQ:CLSK), which is up 57% in 2024 and 311% in the last year. Valued at almost US$4 billion by market cap, CleanSpark recently deployed S21 machines across its facilities, which improved efficiency metrics. These improvements are pivotal as they amplify the company’s mining output while optimizing operational costs.
CleanSpark emphasized that the increase in mining fees following the halving event has bolstered Bitcoin production in April while strengthening its BTC treasury.
The company stated, “We have spent the last several years planning for this moment, and our technological advantages have positioned us to excel under the new market constraints faced by all miners.”
Due to rising BTC prices, analysts expect CleanSpark’s adjusted earnings to expand to US$0.48 per share in 2024 and US$1.31 per share in 2025, compared to a loss of US$1.33 per share in 2023. Analysts remain bullish and expect CleanSpark stock to surge over 40% in the next 12 months.
