Trump support masks miners’ mounting woes as they dump $300m in Bitcoin

Trump support masks miners’ mounting woes as they dump $300m in Bitcoin
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The Bitcoin mining industry may have Donald Trump's support. But the industry is still in a precarious position in the wake of the halving. Credit: Darren Joseph
  • Trump came out in support of the Bitcoin mining industry last week.
  • Bitcoin miners are facing a profitability crunch since the halving.
  • Trump’s influence is unlikely to move the needle for miners in the short term.

Donald Trump’s vocal backing of Bitcoin mining catapulted a niche corner of the crypto industry into the limelight — delighting company executives and Bitcoin backers.

Experts say it’s not enough.

Bitcoin mining is up against a range of hurdles, from the so-called halving slashing rewards they get, to taxes in the US, to short seller attacks.

Miners “face significant profitability issues, and most operate troubled business models,” Quinn Thompson, founder of crypto hedge fund Lekker Capital, told DL News. “Trump can’t fix that.”

Election slogan

In a closed-door meeting in Mar-a-Lago in Florida, Trump, the presumptive Republican presidential nominee, chatted with executives from the largest US mining operations, including Marathon Digital and Riot Platforms, offering his support to industry leaders, CNBC reported.

He then posted: “We want all the remaining Bitcoin to be made in the USA!!!”

The slogan sounds good, in theory, said Alex de Vries, a data scientist at De Nederlandsche Bank and longtime critic of Bitcoin mining, told DL News.

“Which power grids are going to support that? Who is going to pay for the subsidies to lure those miners in in the first place?” de Vries told DL News. “It would cost a lot of taxpayer money to make this happen.”

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Trump’s pro-crypto shift happened as the industry plays a growing role in politics — thanks to a well-funded lobbying campaign.

Miner difficulties

But now, the mining industry needs more than just words.

After the Bitcoin halving — a network update that occurred in mid-April — miners earn half as much Bitcoin for maintaining the blockchain as they did before.

But their operational costs have stayed the same. In some cases, that means they now have the same expenses, but only half of the previous revenue.

To stem the bleeding, miners have begun switching their machines off. They have also been selling their Bitcoin at the highest rate since before the upgrade, said analytics firm CryptoQuant.

The sector has dumped roughly $300 million of its Bitcoin reserves since the beginning of the year, according to the firm’s data. And Marathon, the largest publicly listed US miner, has offloaded $92 million in June alone — about 8% of its billion-dollar stash.

Meanwhile, short sellers are circling, with over $3 billion in shorts piled against miners.

“Bitcoin mining is easily among the worst business models for a public company we have ever encountered,” activist investment firm Kerrisdale Capital wrote in a report announcing a short position in Riot.

Riot’s stock is down roughly 38% this year, while Marathon’s is down 25%.

Killing the mining tax

Trump can’t do anything about miner business models. But there is optimism on the taxation front.

At the federal level, the only legislation targeting the industry is a prohibitive energy tax on miners — and it hasn’t been implemented yet.

The tax, proposed by President Joe Biden, would subject Bitcoin miners to a 30% excise tax on their electricity costs — effectively forcing Bitcoin miners to shut down or move out of the US.

The proposal was dropped in May 2023, and then reintroduced in February. A Trump victory in November would likely kill the idea for good.

Uncertainty

Rob Chang, CEO of Bitcoin mining firm Gryphon Digital Mining, is among those who told DL News that Trump offers hope to a beleaguered sector, even amid uncertainty about the impact of a Trump presidency.

“He does recognise that as a community, Bitcoin and blockchain enthusiasts appreciate leaders who allow the technology to grow without impeding it with outdated thinking,” Chang told DL News.

”Even if no policy is ever changed, the entire Republican bench is going to be pro-Bitcoin mining,” Will Foxley, who runs Blockspace, a mining startup, told DL News.

“For states that might be interested in mining Bitcoin, this is helpful because you have Trump backing it, and it gives more ammunition” for future legislation, Foxley added.

Mining consultant Amanda Fabiano echoed that view.

“Our industry has faced an enormous amount of political struggle, fuelled by misinformation and misguided narratives,” Fabiano, a former director of mining at Fidelity Investments, posted on X alongside a photo of herself with Trump.

“Our industry needs politicians that are interested in learning about the benefits of Bitcoin and Bitcoin mining.”

Joanna Wright and Tom Carreras write about Bitcoin mining and crypto politics for DL News. Got a tip about Trump’s crypto plans? Reach out at joanna@dlnews.com or tcarreras@dlnews.com