The upcoming Bitcoin halving in April 2024 is expected to bring significant changes to the mining landscape, forcing miners to optimize and adapt in order to remain profitable. Currently, Bitcoin miners enjoy rewards of 6.25BTC per block ($170,000), which will be slashed to 3.125BTC per block ($85,000) after the halving. This event aims to reduce inflationary pressure on the cryptocurrency, but it also puts pressure on miners to adjust their strategies.
Publicly listed miners currently mine Bitcoin at a cost of $10,000-$15,000 per coin, according to Wolfie Zhao, head of research at mining consultancy Blocksbridge. Post-halving, these costs are expected to double, raising the breakeven point for miners to $20,000-$30,000. If Bitcoin’s price does not rise significantly above $30,000, many miners may face a gross loss.
JPMorgan even predicts that the cost of mining Bitcoin could reach up to $40,000 after the halving. Under such conditions, only the most cost-efficient miners will survive, with energy costs and equipment efficiency determining the winners and losers. Miners with higher production costs per Bitcoin, such as Stronghold Digital Mining, Cipher Mining, and Riot Platforms, are expected to find it particularly challenging to navigate the post-halving environment.
Anticipating shrinking margins, miners are increasingly focusing on strategies for capital preservation, fleet efficiency, and diversification. The industry is now shifting its attention towards operational and machine efficiency, as opposed to merely expanding hashrate capacity – the prevalent approach during the bull market of 2021. This trend is likely to continue post-halving, with slow growth expected in the following months as efficient machines replace older ones and operations consolidate among the lowest cost players.
However, investments in new mining machines have been measured and cautious due to uncertainty surrounding mining economics over the coming year. Despite this, the hashrate and mining difficulty have continued to increase, setting new all-time highs throughout 2023. Such growth mainly reflects investments made earlier, as mining facilities and equipment take months to develop and deploy.
B Riley analyst Lucas Pipes notes a revived interest in new developments and an uptick in discussions throughout 2023, compared to the lows of the autumn of 2022. Miners’ profitability ultimately hinges on a significant rally in Bitcoin’s price or a substantial decrease in energy costs. Notably, Bloomberg Intelligence and Matrixport speculate that the halving could boost Bitcoin’s price by as much as 81%.
Time will reveal how the mining industry adapts to the forthcoming halving and whether the historic pattern repeats itself, with Bitcoin’s price increase outpacing the halving’s impact. As Kerri Langlais, chief strategy officer at Bitcoin miner TeraWulf, aptly puts it: “Historically, the rise in the price ofBTC has outpaced the impact of the halving. Time will tell what happens in this cycle.”
Source: Coindesk
