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MARA CEO on Bitcoin Mining Profit Pressures and Industry Shifts
Marathon Digital Holdings CEO Fred Thiel has voiced growing concerns about the state of the Bitcoin mining industry, highlighting rising competition, surging energy demands, and shrinking profitability. Speaking in a recent interview, Thiel described the sector as increasingly difficult to sustain without structural changes.
Bitcoin Mining Becoming a Zero-Sum Game
According to Thiel, Bitcoin mining has evolved into a “zero-sum game.” He explained,
“When more participants join, it gets tougher for everyone else. Profit margins fall, and your minimum cost is the money spent on energy.”
Thiel noted that competition has intensified to the point where even well-established miners are struggling to maintain margins. He pointed out that global hashrate growth continues to outpace profitability, leading many operators to rethink their strategies.
Miners Pivot to AI and High-Performance Computing
As profitability declines, some Bitcoin mining companies are shifting toward adjacent industries. Thiel observed that several miners are exploring artificial intelligence (AI) applications and high-performance computing (HPC) infrastructure to diversify their revenue streams.
“You have hardware suppliers running their own mining businesses since customers are not buying as much equipment,” Thiel explained.
He added that major players with direct access to low-cost energy — including hardware manufacturers and companies like Tether — hold a clear advantage over smaller competitors that depend on the traditional energy grid.
Halving in 2028 Could Intensify Pressure
Looking ahead, Thiel warned that the next Bitcoin halving in 2028 could further squeeze miners’ margins. The event will reduce block rewards to roughly 1.5 BTC per block, meaning miners will earn less Bitcoin for the same computational work.
“If transaction fees don’t rise or Bitcoin’s price doesn’t climb significantly, mining could become unprofitable for many,” he cautioned.
Thiel explained that Bitcoin was originally designed with the idea that transaction fees would eventually replace block subsidies, but this transition has yet to occur.
He added that if Bitcoin’s price does not increase by 50% or more annually, profitability could become “challenging after 2028 and considerably tougher in 2032.”
Transaction Fees Remain Insufficient
Although the network has experienced brief spikes in transaction fees — such as during periods of increased Ordinals or inscription activity — Thiel said these surges have been temporary. Analysts agree that fees have not remained high enough to offset the diminishing block rewards.
This imbalance underscores the growing difficulty of maintaining profitability solely through mining operations, especially for companies lacking cost advantages or diversified business models.
Industry Adapts to Survive
Thiel emphasized that miners must remain alert to emerging trends, such as financial institutions purchasing block space in advance to secure faster transaction processing.
He described this as a potential “game-changer,” though still an early-stage concept.
Larger mining companies are adapting by investing in private energy sources or developing AI-focused data centers, while smaller miners are facing operational stress and possible closures.
“By 2028, you’ll either need to generate power yourself, be owned by a power generator, or team up with one,” Thiel said. “The time for being a miner connected directly to the grid is running out.”
MARA’s Cost Strategy and Outlook
To withstand industry headwinds, Thiel stated that Marathon aims to maintain its production costs within the lowest 25% of the global market.
“In a tough mining market, 75% of competitors would have to shut down before we do,” he said confidently.
Despite short-term challenges, Thiel believes the market will eventually find equilibrium as miners reach their individual profit limits. However, he warned that these limits are “rising swiftly,” underscoring the urgent need for cost-efficient operations and strategic adaptation.
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