The Bitcoin mining industry is heading into one of its most challenging phases ever, according to Fred Thiel, CEO of MARA Holdings (Marathon Digital). With rising competition, higher energy costs, and tighter profit margins, Thiel believes only miners that secure control over their power supply—or shift into new businesses such as artificial intelligence—will survive the coming years.
In a recent interview, Thiel warned that mining economics are deteriorating quickly and that the next Bitcoin halving could push many operators out of the market altogether.
Mining Margins Tighten as Energy Costs Climb
Thiel describes Bitcoin mining today as a “zero-sum game.” As more miners join the network and global hashrate increases, existing miners must work harder to stay profitable. Since mining rewards are fixed, additional computing power only makes competition tougher.
“The floor is your energy cost,” Thiel emphasized. That means companies with expensive electricity are the first to go unprofitable when mining difficulty rises.
The challenge is compounded by the rising number of firms entering the mining space—not only traditional operators, but also major hardware manufacturers and large-scale data companies. Some mining equipment vendors are now running their own mining operations due to lower demand from external buyers.
This shift has created a tougher, more competitive environment where miners must operate at maximum efficiency to survive.
AI and High-Performance Computing Become Lifelines for Miners
As profitability shrinks, many mining firms are reinventing themselves. According to Thiel, a growing number of miners are transitioning into areas such as:
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Artificial intelligence data centers
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High-performance computing (HPC)
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Building energy infrastructure for data processing
Mining companies with access to strong capital reserves and energy infrastructure are using their resources to diversify revenue. Meanwhile, smaller miners without energy control or alternative business lines face a difficult future.
Several large mining firms are already using mining sites to host AI workloads, which require powerful GPUs and steady electricity—requirements similar to Bitcoin mining but with potentially higher profit margins.
The 2028 Halving Could Break Many Mining Models
The next major challenge for miners will come in 2028, when the Bitcoin block reward is scheduled to drop again—this time from 3.125 BTC to roughly 1.5 BTC.
Thiel believes the mining industry is not prepared for this sharp decline.
“Unless Bitcoin price grows at 50% or more annually, the math gets very tough after 2028—and even tougher in 2032,” he said.
Historically, halvings have led to consolidation. After each reward cut, only the most efficient miners survive. However, the upcoming halving could be even more severe due to:
Thiel explained that Bitcoin’s original design assumed transaction fees would eventually replace block rewards as the main source of miner income. But so far, that shift has not happened.
Fee spikes linked to Ordinals and inscriptions helped temporarily but were not sustained long enough to meaningfully replace the block subsidy.
Miners Look for New Revenue Models
Thiel noted that miners are closely watching whether new business use cases—such as financial institutions pre-purchasing block space—could create steady, predictable fee markets. But for now, no long-term trend has emerged.
In today’s environment, miners lacking predictable revenue face significant difficulties. Large operators are taking steps to secure long-term survival by:
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Controlling their power supply
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Signing long-term energy contracts
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Building private data centers
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Investing in AI and HPC infrastructure
Meanwhile, mid-size and smaller miners could be forced into shutdowns or mergers if market conditions worsen.
Survival Depends on the Cost of Power
Thiel said MARA’s strategy is to ensure it stays in the lowest cost bracket of miners worldwide.
“Our goal is to be in the lowest quartile in production cost,” he said. “Because in a tight market, 75% of the other guys have to shut down before we do.”
This competitive advantage is rooted in energy. Firms that generate their own power—or partner with energy producers—will be the ones that thrive.
The Future: Miners Must Become Power Companies
By 2028, Thiel expects a major structural transformation in the mining landscape.
“By the next halving, you’ll either be a power generator, be owned by one, or be partnered with one,” he said.
In short, Bitcoin miners must evolve into energy companies—or ally themselves with one—to survive the next chapter of mining economics.
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