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- 1 Experts suggest that Bitcoin’s halving could push the net profits for miners into the red.
- 2 The mining reward will be slashed by halving from 6.25 BTC to 3.125 BTC in April 2024.
Bitcoiners are excited about Bitcoin Halving coming in April 2024, but experts presume miners could suffer this time. Mining rewards are slashed in half every four years or after every 21,000 blocks. Data suggest that a bull run usually follows the event, but miners could be at least waist-deep in the red this time.
Bitcoin Halving 2024: Cheat Sheet 🤫 pic.twitter.com/4SAi3KBpvz
— Altcoin Daily (@AltcoinDailyio) July 7, 2023
Will Bitcoin Halving Affect Miners Negatively?
The data from previous halving events suggest that it is usually followed by a bull run causing a massive price surge. In 2012 halving price surged by a whopping 8,450%; in 2016, the price jumped by 290%. Similarly, in 2020 there was a 560% gain in BTC price after the halving event.
92.5% of all the #bitcoin has officially been mined. Only 7.5% left. pic.twitter.com/ikDmCpwqz4
— Wicked (@w_s_bitcoin) July 9, 2023
Since last halving the reward for mining a block at 6.25 BTC, after April 2024, this reward would also be split to 3.125 BTC. The miners survived these events by increasing their mining efficiency by incorporating advanced technology. Meaning they added advanced machinery to mine one of the best cryptocurrency.
The subsequent rise in BTC prices following the past’s halving processes helped the miners sell their holdings. The profits gained justified the investments made in advanced machinery. However, experts argue that it will take a lot of work this time, as they also have to deal with debt burden and increasing electricity costs.
Crypto mining analyst at Hashrate Index, Jaran Mellerud, argues that nearly half of the BTC miners have their mining operations working with less than optimal efficiency. Also, these miners might suffer during the next halving.
Further arguing about the electricity requirements and their impact on the industry, Mellerud hints argues that the break-even electricity price for the standard mining rig might drop to $0.06/kilowatt-hour from $0.12 KWh. Hence, the miners with operating costs above $0.08KWh will likely suffer this time.
Wolfie Zhao, Head of Research at Blocksbridge, researched the investment required to mine 1 BTC. He discovered that before Bitcoin halved, most miners spent around $10,000 to $15,000 per BTC. He estimates that after April 2024, this amount could swell up to $20,000 to $30,000.
This scenario indicates that most miners would face difficulty surviving the halving, more so if the BTC price is not considerably above $30,000. JPMorgan analysts suggest that the backend cost for mining 1 BTC swell to $40,000—another reason for BTC miners to worry.
Head of research at The MinerMag, the research unit of BlocksBridge, Wolfie Zhao, argues that if every aspect of BTC mining is considered, the total cost for a few miners is well above BTC’s current price. If this is true, the net profits of these miners would be in red after halving.
Another research argues that select mining costs for elite mining firms are considerably low. Stronghold Digital Mining (SDIG) spends $8,200 per BTC, Cipher Mining (CIFR) pays $8,600, while Riot Platform (RIOT) spends $10,400 for mining 1 BTC.
The debt of the BTC mining industry worldwide has been reduced from $4.5 Billion to $6.00 Billion at present. This amount was $8.00 Billion in 2022. Mining difficulty reached a new high in June 2023, indicating increased competition. But this surge resulted in a decline in profit margins.
Kevin Zhang, Vice President at Foundry, suggests that miners could make some profit if the BTC prices stay in the range of $50,000 to $60,000 in 2024.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
