TLDR
- MARA CEO Fred Thiel warns that rising energy costs and competition will shrink Bitcoin mining margins in the coming years.
- Thiel emphasizes that Bitcoin mining is a zero-sum game where increasing capacity makes it harder for everyone to remain profitable.
- The CEO predicts that companies must control energy costs or diversify into AI and high-performance computing to survive.
- MARA is integrating AI into its business with deployments in Texas and partnerships to reduce production costs.
- Thiel highlights that Bitcoin’s reward reduction in 2028 will make the traditional mining model unprofitable under current conditions.
Fred Thiel, CEO of MARA Holdings, warns that the Bitcoin mining industry faces a challenging future. According to Thiel, companies that do not control their energy costs or adapt to new technologies may struggle to survive. In an interview with CoinDesk, he discussed how rising energy costs and competition could further squeeze margins in the coming years.
Rising Energy Costs and Competition Threaten Margins
Thiel highlighted the competitive nature of Bitcoin mining. “Bitcoin mining is a zero-sum game,” he said, explaining that as more players enter the market, the difficulty of mining increases. This, in turn, results in shrinking margins for all players, with energy costs becoming the critical factor.
Thiel emphasized that miners without access to cheap, stable energy will face significant challenges. With the global hashrate growing, more miners are competing for a limited reward, pushing profit margins lower. “As competition grows, it becomes more difficult for companies to maintain profitability,” Thiel explained.
He also pointed out that hardware vendors are now running their own mining operations. This trend is driven by reduced demand for mining equipment. The increase in competition and growth in the global hashrate is making it harder for companies to stay profitable in Bitcoin mining.
Thiel predicts that companies must adapt to new technologies like artificial intelligence (AI) and high-performance computing (HPC) to stay competitive. “By 2028, you’ll either be a power generator, be owned by one, or be partnered with one,” he said. The future of Bitcoin mining could be intertwined with AI and HPC as companies seek to diversify their operations.
MARA has already started integrating AI into its business. The company has deployed AI servers in Granbury, Texas, and partnered with MPLX LP, a subsidiary of Marathon Petroleum Corporation. These moves align with Thiel’s strategy to lower production costs and maintain a competitive edge in a tough market.
Thiel stressed that being in the lowest quartile of production costs will be crucial. “In a tight market, 75% of other guys have to shut down before we do,” he noted. His comments reflect the growing importance of cost control and technological innovation in Bitcoin mining.
Bitcoin Mining Faces Uncertain Future After 2028
The upcoming halving in 2028 will reduce Bitcoin block rewards to just over 1.5 BTC. Thiel warned that under current conditions, this could render the traditional mining model unprofitable. He explained that Bitcoin was designed to rely on transaction fees to replace subsidies, but this has not happened.
Thiel also pointed out that transaction fee spikes are temporary and insufficient to make up for the reduction in rewards. Without strong growth in Bitcoin adoption, the math for traditional mining becomes difficult after 2028. Despite occasional fee increases through innovations like Ordinals and inscriptions, these are short-lived and cannot sustain profitability.
With the Bitcoin mining industry facing tough conditions, Thiel’s comments highlight the need for miners to adapt. He stresses that diversifying into areas like AI or building energy infrastructure may be necessary for survival. As Bitcoin mining margins continue to shrink, companies must explore new strategies to remain viable.
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