According to mining analysts, the subsequent Bitcoin halving will likely double the cost of mining one BTC to $40,000, putting many miners out of business.
According to a July 8 report by Bloomberg, the subsequent Bitcoin (BTC) halving, scheduled for April 2024, is anticipated to present difficulties for miners as it may drastically affect their revenues. Every four years or so, bitcoin experiences a halving, which affects mining earnings. Previous Bitcoin price halves occurrences were followed by substantial price gains, generating sizable earnings for miners.
But with the impending halving, mining payouts will drop from the current 6.25 BTC to 3.125 BTC. Although technology breakthroughs and positive BTC price rallies have historically allowed miners to offset the reduced incentives, the research emphasizes that things could get trickier in the coming year. The profitability of miners may be impacted by anticipated increases in debt and electricity expenses.
According to the Bloomberg study, the April 2024 halving of BTC might possibly cause miner income to decline. Although previous halving occurrences have been followed by bull runs and increased investor interest, miners will need to find creative ways to overcome the difficulties brought on by the diminished mining profits and rising costs. As Bitcoin miners work to retain profitability in a changing market environment, the impending halving will put those skills to the test.
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Efficiencies drop, profits drop
According to a Bloomberg story, Jaran Mellerud, a crypto mining analyst at Hashrate Index, has cautioned that nearly half of Bitcoin miners may experience difficulty following the next halving. According to Mellerud, these miners’ operations are less efficient than they should be, which could have an effect on their profitability after the decrease in mining payouts.
After halving, it is anticipated that the break-even power price for the most prevalent mining machine will drop from $0.12/kWh to $0.06/kWh. However, according to Mellerud, 40% of BTC miners use electricity at a cost per kWh greater than $0.06/kWh. This indicates that the halving is expected to have a major impact on miners who have running costs above $0.08/kWh and those who do not own their own mining equipment.
Furthermore, many of the biggest mining companies are currently concentrating on paying down their debt, which is limiting their profitability. According to Ethan Vera, COO at Luxor Technologies, the global mining industry’s debt has fallen from $8 billion in 2022 to roughly $4.5 billion to $6 billion today. These mining corporations will need to balance their debt obligations with the difficulties presented by the halving.
In June, the mining difficulty hit a record high, signaling increased mining rivalry. Profit margins for miners are shrinking as competition gets more fierce. Kevin Zhang, senior VP at Foundry, indicated that BTC prices would need to increase to roughly $50,000 to $60,000 next year for miners to maintain the same profit margins.
A difficult environment for Bitcoin miners may result from a combination of increased competition, significant inefficiencies, and the halving of mining incentives. In order to be successful in the changing environment, many miners will need to find ways to optimize their operations, reduce costs, and possibly upgrade their mining equipment.
For miners, the upcoming Bitcoin halving in April 2024 will be a major test, and those who can adjust to the shifting dynamics of the market are more likely to succeed. The long-term survival of Bitcoin mining businesses will be largely dependent on efficient operations, affordable electricity prices, and smart debt management.
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Preparations may prove futile
According to information from TheMinerMag, publicly traded miners in Q1 2023 reportedly cost between $7,200 and $18,900 to mine one Bitcoin. But according to JPMorgan’s estimate, which was highlighted in the Bloomberg story, the impending Bitcoin halving is anticipated to double the cost of mining to roughly $40,000. This estimate emphasizes the rising costs miners will incur as mining returns decline.
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According to Kevin Zhang, senior VP at Foundry, miners are implementing more advanced strategies to manage their power expenses and establish pricing agreements with their power providers in advance to get ready for the halving.
Tiffany Wang, CEO of BTC miner Lotta Yotta, warned that despite these precautions, the price halving may force many miners out of business. Due to the increased expenses and diminished benefits, some miners may find mining less profitable, which could result in industry consolidation.