Lead
Bitcoin mining will become increasingly unforgiving as competition intensifies and electricity prices rise, warns Marathon Digital CEO Fred Thiel. He cautions that the 2028 halving, which will cut the block subsidy to 1.5625 BTC, could render many operations uneconomical unless bitcoin’s price or on-chain fees increase.
Key Developments
- Thiel said mining is effectively a zero-sum game, where new hashrate squeezes margins for incumbents.
- The 2028 halving will reduce rewards from 3.125 BTC to 1.5625 BTC per block, pressuring miners’ revenue.
- Only miners with stable access to low-cost power or diversified businesses (e.g., AI compute) are likely to endure.
- Competition for resources is intensifying as larger players, including equipment manufacturers and new entrants like Tether, expand into mining.
- Proposed ideas to increase miner income — such as selling blockspace for priority settlement — remain largely conceptual.
“Mining is a zero-sum game,” Thiel noted, emphasizing that each wave of added hashrate makes it harder for others to stay profitable.
What’s Driving the Pressure
- Rising energy tariffs: Electricity costs remain the dominant input for proof-of-work miners, and rate increases directly erode margins.
- Hashrate growth: New capital continues to deploy into mining infrastructure, diluting rewards on a per-TH/s basis.
- Fee uncertainty: Transaction fees can spike during periods of high demand but are volatile and not a guaranteed cushion.
Survival Strategies
Thiel underscored two paths to resilience:
- Control the energy stack: Secure long-term, low-cost power or invest in self-generation to mitigate price volatility.
- Diversify revenue: Allocate infrastructure to AI/HPC workloads or other adjacent compute services to smooth cash flow across bitcoin market cycles.
He added that without a sustained increase in bitcoin’s price or transaction fees, 2028 could be a critical breaking point for subscale or high-cost operators.
Industry Context
Containerized, industrial-scale mining sites — the kind Marathon and other large operators deploy — highlight the sector’s escalating capital intensity and focus on operational efficiency. As competition for ASICs, power contracts, and favorable jurisdictions grows, smaller miners may find themselves crowded out by larger, vertically integrated firms.
Conclusion
With the next halving set to drop the block reward to 1.5625 BTC, miners face a narrowing window to optimize power costs, scale efficiently, or diversify into complementary compute. Unless network fees or bitcoin’s price rise meaningfully, 2028 could mark a decisive shakeout across the mining industry.