According to Bloomberg, the subsequent Bitcoin (BTC) halving, scheduled for April 2024, could send miner revenues into the red.
The mining incentives for Bitcoin are halved every four years; this event is known as a Bitcoin halving. The event is welcomed by traders because major bull runs always embrace all Bitcoin halvings. Following the halving events in 2012, 2016, and 2020, the value of BTC increased by 8,450%, 290%, and 560% in a year, respectively.
With the impending halving, mining payouts will drop from the current 6.25 BTC to 3.125 BTC. BTC miners have up till now compensated for the loss of mining profits after each halving by increasing their efficacy using technological advancements.
The BTC price increases have also benefited miners, who can sell their holdings for significant profits. However, the survey noted that as miners deal with rising electrical energy prices and debt burdens over the course of the upcoming year, things will become more challenging.
Much lower effectiveness and income
Bloomberg was informed by Hashrate Index’s Jaran Mellerud, a crypto mining analyst, that less than half of Bitcoin miners are effectively using their equipment. This makes these miners more likely to fight after the subsequent halving.
According to Mellerud, after halving, the break-even electrical energy cost of the most common mining machine is expected to go from $0.12 per kilowatt-hour to $0.06 per kWh. However, he said that about 40% of BTC miners operate at a cost per kWh more than $0.06/kWh.
Because of this, Mellerud continued, miners with labour costs exceeding $0.08/kWh and those without personal mining rigs are more likely to experience a significant impact from the halving.
Head of analysis at mining consulting firm BlocksBridge’s TheMinerMag, Wolfie Zhao stated:
Additionally, the majority of the biggest mining companies are still working to reduce their debt, which is eating away at their profits. According to Ethan Vera, COO at Luxor Applied Sciences, the global mining industry’s debt has decreased from $8 billion in 2022 to roughly $4.5 billion to $6 billion at this time.
Additionally, mining issues reached an all-time high in June, suggesting that miner competition is growing. As a result, miner sales margins are decreasing. According to Kevin Zhang, senior VP at Foundry, for miners to maintain the same profit margins, BTC prices must increase to $50,000–$60,000 in the upcoming year.
The preparations made are probably insufficient.
According to information from TheMinerMag, 14 publicly traded miners spent between $7,200 and $18,900 to mine one bitcoin in Q1 2023. According to JPMorgan projections, the price of mining is expected to double as a result of the BTC halving, according to a Bloomberg story.
Zhang’s reaction was that miners prepared for the halving by being “extra subtle with their energy prices and safe the pricing from their energy suppliers prematurely.”
All miners should be prepared for the halving, according to Tiffany Wang, CEO of BTC miner Lotta Yotta, but “quite a few miners will finally be pushed out of the market.”
