Bitcoin mining still profitable post-halving: Fireblocks CEO

The highly anticipated bitcoin (BTC-USD) halving took place on Saturday, April 20, a process in which the reward for bitcoin miners is reduced by half. This event which happens once every four years operates to control the number of bitcoins in circulation. Fireblocks CEO Michael Shaulov joins Yahoo Finance to discuss the implications of this event for bitcoin miners.

Shaulov notes that bitcoin mining activity is continuing, with many miners "investing" in the belief that they will be compensated due to the halving event. He explains that there are two primary sources of rewards for bitcoin miners: "solving a puzzle... that secures the bitcoin network" and navigating the fees that users are willing to pay for bitcoin transactions.

When asked about the potential integration of artificial intelligence (AI) in bitcoin mining, Shaulov states that given the current Bitcoin prices, "this is still quite profitable for miners." He does not believe that AI poses "a hedge" for bitcoin miners at the moment.

As regulatory frameworks become more robust and spot bitcoin ETFs continue to gain traction, Shaulov anticipates the investor base could expand and drive prices upward across the cryptocurrency landscape.

Want to learn more about the bitcoin halving? Watch this video from Yahoo Finance for a quick explainer: Bitcoin halving: Explained

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Angel Smith

Video transcript

- Bitcoin completing its halving on a Friday. Now, that process, that happens every four years. Take a look at the price of Bitcoin and some of the reaction that we're seeing play out this morning. We're actually seeing prices move further to the upside now above 66,000.

Now, one of the big questions, though, that remains is the effect it's going to have on the business for Bitcoin miners themselves and that pressure that that could look like here for revenue, at least in the short term. We want to bring in Michael Shaulov. He is the CEO of Fireblocks.

Michael, it's good to have you here. So talk to us just about the price action that we've seen in Bitcoin miners because they're actually holding up better than many had feared as a result here of this having. So what's going on?

MICHAEL SHAULOV: Yeah, thanks for having me. And basically, what we're currently seeing is that the activity of the Bitcoin network just continues what we're hearing. So we're basically servicing some of the Bitcoin miners from a custody technology standpoint. And what we're hearing from them is that they continue to invest. They actually think that they are going to be compensated on having the fact that they're now getting half of the price. And I don't think we are going to see the market dropping, at least this is not what they're expecting.

- What is the expectation for the prices that Bitcoin miners are expecting to have to factor in to their expense base now?

MICHAEL SHAULOV: Yeah. So just to maybe take half a step back. Basically, the way that Bitcoin miners getting their rewards, there are two parts to it. The first part is that they need to solve a puzzle, which basically secures the Bitcoin network. And the second part is basically the fees of the people that are doing the Bitcoin transactions, what they're willing to pay.

So after the halving, basically the first part of getting rewards for solving the puzzle, that was dropped by half. And therefore, what they anticipate is that the Bitcoin prices will continue to rise, so they will be able to continue and buy the energy that they need to operate the network

- Michael, when you take into account some of the things or some of the changes that crypto miners are undergoing right now, I've been seeing more and more headlines talking about the shift to AI and how they are employing AI to offset some of that increased cost. Can you talk to us a little bit more about what that opportunity looks like and I guess the benefit that this will ultimately be here for some of those miners in the longer term?

MICHAEL SHAULOV: Yeah. I think that there is a narrative of using the same compute that is being used to operate the mining. So for example, some of the NVIDIA cards and allocate some of that to AI workloads. But right now, with the prices that we see in terms of Bitcoin, this is still quite profitable for the miners. So it's not clear that if the shift to AI is something that is actually a hedge, assuming that the Bitcoin activity will become less profitable. It's definitely not something that we're seeing right now.

- Michael, there's a new protocol here as well that's come along with this most recent halving. And I think we're trying to wrap our heads around exactly what that means going forward from here, especially for a lot of the potential Bitcoin investors called "runes," I believe it is. And so I mean, does that change how people should be thinking about Bitcoin, about the problem solving equation, and the mining process at all? Or is this just something that was to be expected coming along with this halving?

MICHAEL SHAULOV: Yeah. So as part of what we were seeing in the last year with Bitcoin, we started to see NFTs, basically non-fungible tokens something that we've seen in the previous cycle. And that activity has sort of started to become somewhat popular on Bitcoin. That actually creates a lot of activity on the Bitcoin network, where essentially, people need to pay fees to operate that protocol. And therefore, the miners are able to gain or basically get some of the offset from the halving from that new activity.

- Michael, what do you see as the biggest near-term drivers of the crypto price action?

MICHAEL SHAULOV: Yeah. I think that what we are about to see is that with the Bitcoin ETF coming in and some of the regulatory clarity that we are starting to see on the global scale, we'll probably will start seeing more and more players that are able to offer access to a bigger investor base, so essentially both retail and professional and institutional investors. And that will probably will what would start driving the prices up both for Bitcoin and other cryptos.

And for other cryptos, especially for protocols like Ethereum, Polygon, Solana, and so on, we're actually seeing real utility in terms of payments, Web3 royalties, and things like that increasing the adoption. And therefore, those are much more mainstream activities that are going to drive the prices of some of those protocols.