Bitcoin (BTC-USD) prices are holding above $63,000 as the cryptocurrency gives up some ground on Monday. The bitcoin halving event is projected to take place this Friday, April 19, which operates to reduce the amount of available bitcoins in circulation once every four years.
The bitcoin halving directly impacts the profits of bitcoin miners, including Riot Platforms (RIOT). Riot Platforms CEO Jason Les speaks with Yahoo Finance about Riot's preparations for the halving and the "compelling" upside effects the crypto space is currently experiencing, despite whatever "rough patch of volatility" the halving will bring.
"The price appreciation in the first part of this year following the approval of various bitcoin ETFs, I think, has really helped dampen the negative impact of the halving will have on miners because we've already seen some upside. from this," Les says, later adding: "Our value proposition to investors is that through our low cost to power, we are effectively purchasing bitcoin at a discount to its market price. We are getting leverage on bitcoin nd we... expect to have more outsized returns when the bitcoin price appreciates."
JULIE HYMAN: Bitcoin drifting lower today after a steep weekend sell-off following Iran's attack against Israel. Joining us now, Jason Les, CEO of Riot Platforms, which is a bitcoin mining company. And I know all of the talk in the bitcoin mining world has been about the upcoming halving. But I do want to ask you first about price, Jason, and kind of, you know, what you're expecting here in the coming week. It's a little bit difficult to predict these days how bitcoin is going to react to geopolitical events.
JASON LES: Yeah, it is difficult. And I would even remove the second part of there, it's always difficult to predict how the price of bitcoin will react. I think the fact is there's lots of trading and fast money in and out of bitcoin all the time. And geopolitical events like what we witnessed over the weekend can cause a lot of short-term volatility.
If you zoom out and look at bitcoin over the long term, though, there's a very positive trajectory in the price upwards and to the right. And that's because bitcoin is sound money, bitcoin has a fixed supply. And that is attractive to investors. And halving that we're going to experience this Friday is a part of that fixed supply in action.
JOSH LIPTON: And Jason, have you made any changes, kind of pulled any levers in preparation for that halving for the business?
JASON LES: The preparation for halving really comes years before it happened. So I would say, Riot prepared for this halving by being focused on having a very low energy cost in 2023. We had a energy cost of 2.2 cents per kilowatt hour, it's one of the lowest in the industries. And years ago, we started building a new facility that comes online this month. So this facility has expansion. And it's where we're deploying the latest, greatest, most efficient machines out on the market.
So we prepared for this halving years ago. And the decisions we make today are us preparing for the halving that will come four years from now in 2028.
JULIE HYMAN: Jason, help explain this to us. Because when the halving happens, the amount of bitcoin you will get for mining each bitcoin will be about half what it is right now. And there is a limit that is half what it has been in terms of the amount of bitcoin you can mine per day. How does that not just simply cut your revenue in half?
JASON LES: Well, it immediately does cut revenue in half for miners. So it's always a rough patch of volatility that we go through. But the fact is if you look past some previous halvings, we have seen huge appreciations in price in the 12 to 18 months following the halving. And in fact, this case, it's a very unique circumstance, we've seen Bitcoin reach a new all-time high even before this having has occurred.
So the price appreciation in the first part of this year following the approval of various bitcoin ETFs, I think, has really helped dampen the negative impact of halving will have on miners, because we've already seen some upside from this. But going forward, I think the effects that we're seeing on the ETFs in the marketplace are really compelling. These ETFs, you put Grayscale Bitcoin Trust aside, we've seen net inflows of about $27 billion in the three or so months since these ETFs have approved. These ETFs have today about half the assets under management that gold has after being around for almost 20 years.
So I think there's a compelling investment thesis with bitcoin. I think the world community is seeing that. And while the halving from a bitcoin block reward perspective is a cut in half of our rewards, I think we're in a very bullish scenario for price appreciation in the years to come here.
JULIE HYMAN: Jason, what will your-- what will the bitcoin price have to be, like what's your break even when it comes to the level of bitcoin post-halving?
JASON LES: So because we focus on such a low cost of power, we're prepared for periods of a slumps in bitcoin mining economics, like what a halving might have. If you look at the latest generation bitcoin mining hardware right now, those machines have a break even price of about $200 a megawatt hour. So when the having occurs, that effectively gets cut in half to $100 a megawatt hour. And Riot's case, our cost of power all in 2023 was $22 a megawatt hour.
So even with the halving, we still have a healthy margin here. But we're still bullish on the future prospects of bitcoin. That's why we hold so much Bitcoin on our balance sheet. And we believe mining economics will rebound following the halving in the 12, 18 months thereafter.
JOSH LIPTON: You know, Jason, your stock hit a 52-week low today. It's down about 40% so far this year. Is there a part of your story, Jason, that you think investors just aren't really appreciating?
JASON LES: I think this whole market is new. So I think because of the ETFs, institutions have another vehicle to get exposure to Bitcoin before. So I think a lot of money is looking at this having and thinking, hey, why-- I don't know enough about mining to pick who's going to be the winner and loser on the other side of this. I want to just sit in bitcoin and see how the halving plays out and see how miners perform post-halving.
So I think that's one of the main reasons we've seen poor stock performance across the whole bitcoin mining sector. I think our value proposition to investors is that through our low cost to power, we are effectively purchasing bitcoin at a discount to its market price. We are getting leverage on bitcoin. And we have expect to have more outsized returns when the bitcoin price appreciates.
So I think there's a temporary slump around the Bitcoin mining stocks because of the halving. We saw something very similar in the prior halving. I believe the beta from bitcoin mining stocks to bitcoin was very low leading up to the halving in 2020 and then in the months thereafter and then continuing to 2021. That beta increased significantly. And it was a huge bull market for all of us.
So the short answer is I think there's money-- the money is-- a lot of money is pulled out of bitcoin mining stocks. And it's kind of waiting and seeing who's going to be the strong performer on the other side of the halving.