Bitcoin Halving: Challenges and Opportunities
In approximately 10 days, the Bitcoin community will witness a significant event – the Bitcoin halving. This phenomenon will halve the reward for mining a Bitcoin block from 6.25 to 3.125 Bitcoins, putting pressure on miners’ profitability. Miners are now in a race against time, requiring higher Bitcoin prices to maintain their earnings.
Why Bitcoin Miners Will Face Challenges
According to a report shared with the community, miner hashprice has dipped by 30% since the last halving in May 2020. Currently valued at $0.11 per Terahash per second, this figure is poised to drop to $0.055 after the halving, assuming stable market conditions.
- The hashprice is the average revenue a miner gets each time it tries to find a valid Bitcoin block
Additionally, Bitcoin transaction fees have seen a dramatic decrease, plummeting from 412 Bitcoin per day in mid-December 2023 to just 29 Bitcoin, marking a 90% reduction. Currently, transaction fees contribute just 3% to the total block reward, significantly down from 37% in mid-December 2023.
Increased Competition Among Miners
The competition among miners has reached unprecedented levels, with the Bitcoin network hashrate soaring to approximately 600 exahashes per second (EH/s), up from 116 EH/s since the last halving. This surge means miners must exert significantly more effort and resources to mine the same amount of Bitcoin, with the cost of mining increasing tenfold since May 2020.
- Bitcoin network hashrate indicating total computational power has soared to approximately 600 EH/s
Impact on Bitcoin Reserves and Price
In response to these challenges, some miners have escalated their Bitcoin selling activities. Daily sales to over-the-counter (OTC) desks hit 1,600 Bitcoin in late March, the highest since August 2023. Meanwhile, the Bitcoin reserves held by miners have been on a consistent downward trajectory over the last year.
- Significant selling from Bitcoin miners can put pressure on Bitcoin’s price
Not All Mining Companies Are Struggling
While major players have reported declines in Bitcoin production, CleanSpark has seen an increase. This variation highlights the differing impacts of market dynamics and operational issues on mining firms.
Expert Perspective on Mining Industry
Sheraz Ahmed, the Managing Partner at Storm Partners, argues that the mining industry doesn’t need special preparation for the halving, as market forces will eventually stabilize the situation. Past halving events support Ahmed’s view, as the total daily revenue of the Bitcoin mining industry has hit new highs in 2024.
- Ahmed believes that the price should reflect the decrease in miner rewards
Hot Take: Potential for Equilibrium Post-Halving
Despite the immediate challenges faced by miners, the industry may find a new equilibrium after the halving, as seen in past halving events. This suggests that with market adjustments and stabilization, the mining industry may overcome the challenges posed by the halving event.
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