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Genoot said during an interview with Bloomberg on April 2 that large scale miners must become “low-cost operators” to ensure they can survive the turbulent market conditions post-halving.
He said:
“My belief is to be a successful large scale miner in this ecosystem, you just have to be a low cost operator.”
Genoot added that this is a core part of Hut8’s strategy as evidenced by strong balance sheet with a substantial Bitcoin reserve of approximately 9,100 BTC, worth around $600 million as of press time.
He also discussed the company’s mergers and its strategic decisions in light of past market downturns and emphasized learning from previous challenges to fortify the company’s current position.
Mitigating risk
Genoot said that bankruptcies may be less common than during the 2022 crypto market crash, when prices were close to $40,000 as the industry has matured over the past year.
The Hut8 CEO said there has been a shift in the mining sector from leveraging debt for growth to pursuing equity-driven expansion strategies in an effort to reduce bankruptcy risks that have plagued the industry.
According to Genoot:
“In 2022, a lot of companies grew with debt, and that debt couldn’t be serviced when Bitcoin prices went down, and energy prices went up. Where we are today, a lot of the growth we’ve seen has been through equity markets.”
Furthermore, Genoot anticipates an increase in mergers and acquisitions (M&A) within the crypto mining sector, driven by the need for capital and the challenges smaller scale operators face in raising the necessary funds for growth.
He believes that the capital will concentrate among the largest scale operators who can maintain the lowest marginal cost of production, thereby ensuring their dominance and sustainability in the market.
Halving imminent
Bitcoin’s next halving is expected roughly around April 18 as of press time. The event will reduce miner block rewards by half from 6.25 BTC to 3.125 BTC.
Historically, Bitcoin’s price has seen major falls post-halving as miners are forced to sell their reserves to stay operational due to the massive hit to profitability. The final stage of the Bitcoin bullrun — which takes the price to new all-time highs — usually comes months after the halving once the sell pressure dries up.
However, the supply and demand dynamics are vastly different from historical cycles due to the introduction of spot Bitcoin ETFs that have opened the gate for institutional money to flow into the crypto market and driven Bitcoin to new all-time highs weeks before the halving.
Additionally, large miners have been preparing for the event in advance, with several companies expanding to ensure profitability post-halving.