Written by Øyvind Sjaastad

August has been a busy month on the bitcoin mining scene. We’ve seen the US publicly listed miners continue their activity in the capital market and on the M&A front, regulatory push backs, and a strengthening High-Performance Computing narrative.

The public miners have also spent August releasing their Q2 numbers, giving valuable insights into their state of affairs. The numbers were red across the board due to the pressured situation the industry currently finds itself in, and the situation has not improved materially since then.

Regulation
On the regulatory front, the bitcoin mining ecosystem faced both headwinds and tailwinds in August.

We’ve seen Russia officially legalize bitcoin mining effective from November 1st. The new legislation stipulates that registered legal entities and individual entrepreneurs will be permitted to engage in cryptocurrency mining. This move is a part of Russia’s efforts to reduce its reliance on the US dollar. After Russia faced large-scale financial sanctions by western countries following their invasion of Ukraine in 2022, the nation state behemoth now wants to use the censorship-resistant, borderless properties of bitcoin to conduct international trade, and are embracing mining to do so. Having domestic mining activity hands the nation-state transactional freedom by giving it the ability to include their own transactions in blocks.

The entrance of Russia onto the mining scene could also boost the network hashrate and diversify the global bitcoin mining activity among more jurisdictions. Both of these possibilities are fundamentally positive for the bitcoin network, as they make the network more secure and resilient.

Not all regulatory news has been positive. A recent IMF report proposes a direct tax of $0.047 per kilowatt hour to curb the emissions of the mining sector. The proposed tax addition is hefty, and would make mining activity wildly unprofitably in most jurisdictions.

The graph below illustrates how the proposed power tax would impact the bitcoin production cost for mining operation with different base electricity rates. It assumes that we use a bitcoin mining fleet consisting of 1 MW of Antminer S19 XP mining rigs, generating a daily revenue of $1,935. At an all-in power cost of $0.08 per kWh, this fleet was barely profitable, with daily production costs of $1,920—just below the revenue generated. However, if a $0.047 per kWh power tax is imposed, the daily production costs would rise to $3,048, significantly exceeding the operation's revenue potential.

The proposed tax would in fact render any mining operation without access to extremely low-cost power unprofitable. Even operations with an all-in power cost as low as $0.035 per kilowatt-hour, which is exceptionally low, would struggle to remain profitable under these economic conditions, showcasing how harmful this tax would be for the mining industry.

Luckily, the IMF, whose purpose is to promote global economic stability through financial assistance and policy advice, doesn’t have the authority to introduce the proposed tax change anywhere. The ultimate decision to implement such a power tax changes rests with individual governments. However, the proposal could still influence policy makers around the world, creating second-order negative effects for the mining industry if it is followed.

We also saw more severe crackdowns on the bitcoin mining industry during August. Iran, which first banned Bitcoin mining in May 2021 as part of a broader crackdown on activities that were straining the country's electricity grid, has again set its eyes on illegal domestic mining activity. Amid a recent severe power crisis, triggered by an intense heat wave, the government has launched a bounty program to incentivize citizens to report illegal mining operations.

Authorities in both Thailand and Paraguay have also recently raided and shut down illegal mining operations. Thai authorities raided a mining operation located west of Bangkok on August 23rd following residential complaints about frequent power outages. These were likely triggered by the energy-intensive illegal mining operations. Meanwhile, the Paraguayan government detected and seized almost 700 miners that didn’t register their power consumption. These crackdowns again illustrate the importance of following the rules when mining bitcoin, otherwise you risk having your equipment confiscated by the authorities.

Capital Markets Activity
In August, publicly-listed Bitcoin miners were notably active in the capital markets, raising over $800 million in debt financing. This capital has primarily been allocated towards debt repayment and Bitcoin acquisition.

We’ve also seen miners with robust balance sheets pursue growth. Cleanspark and Cipher Mining both announced new mining site acquisitions to expand their capacity. Meanwhile, Riot, leveraging its strong financial position, has launched a hostile takeover bid for Bitfarms, acquiring a 19.9% stake in the internationally diversified miner. This move has prompted Bitfarms to schedule a shareholder meeting on October 29th to address the bid.

Concurrently, Bitfarms has entered into a merger agreement with Stronghold, in a transaction valued at approximately $125 million in equity plus $50 million in debt. This merger will significantly expand Bitfarms' energy portfolio, increasing its power capacity to over 950 MW by the end of 2025, with the potential for further expansion to 1.6 GW.

These developments occur amid a broader industry consolidation, driven by low post-halving profitability in Bitcoin mining. Companies with strong financials are positioned to capitalize on distressed assets, either by acquiring new sites or entire companies. As such, increased activity in the capital markets is expected to continue.
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​The Artificial Intelligence Narrative
Bitcoin miners also continued to lean into the High-Performance Computing (HPC) space. This is currently one of the hottest narratives in the business world, and could prove to be a valuable new business vertical for miners. In total, seven mining companies — Core Scientific, Hive digital, Iris energy, Hut 8, Mawson Bit Digital and Terawulf— are attempting to capitalize on the HPC opportunity to varying extent.

In August, Core Scientific, which emerged from chapter 11 bankruptcy in early 2024, has continued to reposition itself as one of the top bitcoin miners in the AI and HPC space. The mining giant announced that the company will refit an additional ~112 MW of infrastructure to support HPC operations to CoreWeave, which takes its total contracted power with CoreWeave to 382 MW, representing a substantial share of the company’s 1.2 GW of contracted power.

Meanwhile, Bit Digital announced a binding term sheet with Boosteroid on August 19th. The agreement, pending further due diligence and the signing of a master service agreement, includes an initial purchase of GPU servers that could generate approximately $13 million in revenue over five years. The deal has the potential to scale significantly, offering Boosteroid the option to deploy up to 50,000 GPU servers, which could result in over $700 million in revenue for Bit Digital during the contract's term. Mawson also expanded its HPC capacities in August. The company has expanded a lease in Ohio, which takes its total operational HPC capacity from 129 MW to 153 MW.

Overall, if the HPC narrative continues to blossom, the market could reward HPC-diversified miners with superior returns as investors are hungry for anything that can yield profits. Therefore, we expect more miners to explore this business vertical in the upcoming months and years.

All the public mining companies released their Q2 numbers in August. These reports revealed that the public mining industry faced significant economic pressures last quarter, resulting in a situation where virtually a single large-scale mining company reported significant losses.

Three mining companies reported operating losses exceeding $100 million in the second quarter. Cleanspark led with an operating loss of $249 million, followed by Marathon with a loss of $232 million, and Riot with a loss of $117 million. Notably, all other leading mining companies also reported operating losses, with the exception of Core Scientific, which managed to achieve a net gain of $7 million.

These challenging financial results underscore the difficult economic environment that Bitcoin miners have faced since the halving in April of this year. Unfortunately, the situation has shown little improvement, with the hashprice currently at $0.041, nearing an all-time low. Given these conditions, we anticipate that many mining companies will continue to experience financial difficulties in the upcoming quarter, at least absent a big jump in the bitcoin price.

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