Bitcoinย (BTC) mining has had a tumultuous journey inย theย previous year. The bearish market conditions, growing energy costs, and increased difficulty levels have made it increasingly difficult for miners to remain profitable.
Nonetheless, reportsย by a recent Twitter thread by Mitchell, a researcher at Blockware Solutions, the tides are shifting, and the outlook for Bitcoinย (BTC) mining is looking positive.
Is The Future Of Bitcoinย (BTC) Mining Bright?
Mitchell impliesย that to be positiveย tendency on mining, one must likewise be positiveย tendency on Bitcoin. Bitcoin has proven to be a resilient investment, with a fixed supply and a growing list of use cases. Mitchell outlines theย capacity collapse of fiat banking and debt-ceiling increases as factors that make Bitcoinย (BTC) an attractive investment.
The researcher outlines the impact of Application-Specific Integrated Circuits (ASIC) commoditization on miner profitability in his analysis. He pointsย out the decreasing marginal efficiency profits of new ASICs mean that mid-generation machines wonโt be be made obsolete by new-generation machines, and the network hashrate wonโt be maintain its historical growth rate.
This has important implications for miner profitability. Because in the past, when new ASICs were released, older machines would quickly become obsolete, and miners who did not upgrade would be left behind.
Nonetheless, with new ASICsโ decreasing marginal efficiency profits, mid-generation machines can remain competitive for longer, allowing incumbent miners to remain highly profitable for longer periods.
Inย addition, the delay betwixt price bull runs and hashrate bull runs has increased, as acquiring new hashrate requires miners to secure a power source, build infrastructure, and acquire ASICs.
Thisย implies that incumbent miners have been able toย sustain their competitive advantage for longer time periods, as it takes more time for new miners to enter the market and increase the hashrate.
The Power Of Transaction Fees
Mitchell likewise discusses the role of transaction charges in Bitcoinย (BTC) mining. Althoughย while numerous may not like the idea of paying charges to inscribe jpgs on the chain, the scarcity of block space impliesย that demand for transactions will be high withinย a bull market. This will likely lead to charges that are higher than the 3.125 Bitcoin subsidy, further increasing miner profitability.
Higher transaction charges can significantly increase miner profitability, as they provide anย extra source of revenue on top of the block subsidy. This is particularly important in times of low block subsidies, such as after each halving event when the block subsidy is reduced by half. In these situations, higher transaction charges couldย be necessary toย maintain profitability for miners.
Another factor that Mitchell outlines is the tendency toward zero future supply of Bitcoin. Althoughย while BTCโs supply will soonerย orย thereafter reach its limit, the dollar-denominated value of the remaining future supply is trending up. Thisย implies that incumbent miners will be dollar-cost averaging at a wholeย lotย of discount when Bitcoinย (BTC) is currentlyย worth higher prices.
Inย theย end, Mitchell notes the tendency of declining exchange balances and increased Bitcoin adoption. As the halving decreases the price at which future supply becomes circulating supply, and more people adopt Bitcoin, there will be fewer Bitcoin on exchanges. This could further increase the scarcity of Bitcoinย (BTC) and drive up itsย value, leading to even greater profitability for miners.
Inย general, Mitchellโs analysis impliesย that plentyย of factors are contributing to sustained profitability for Bitcoinย (BTC) miners. Althoughย while the challenges of 2022 were wholeย lotย of, the commoditization of ASICs, coupled with theย capacity for higher transaction charges, increasing the dollar-denominated value of remaining future supply, and declining exchange balances, are all positive indicators for futureย ofย the Bitcoinย (BTC) mining.
Featured image from iStock, chart from TradingView.comย
