According to a group of experts, miners who have access to the most efficie mining equipme and cheap energy will probably be the only group that will be able to coinue halving Bitcoin next year.
According to CoinDesk, the Bitcoin mining hashrate, a measure of computing power on the network, is likely to drop sharply a year from now when mining rewards are halved.
A halving is an eve that roughly once every 4 years halves the reward for successfully mining each new block with the aim of reducing inflationary pressure on Bitcoin. The mining reward is currely 6.25 bitcoins equivale to about $166,000, which will decrease to 3.125 bitcoins equivale to $83,000 in April 2024 (Frudin 1403).
Wolfie Zhao, head of research at mining consultancy Blocksbridge, says:
Currely, public mining companies mine each bitcoin at a cost of around $10,000 to $15,000. After halving, these costs will be doubled and the miners’ break-even poi will reach $20,000 to $30,000.
He added:
If the price of Bitcoin does not reach above 30,000, mining will be a loss for many of these companies.
JP Morgan, the US banking gia, has predicted that the cost of Bitcoin mining will likely increase to $40,000 after the halving.
As a result, with increasing mining costs and no significa growth in the price of Bitcoin, only efficie miners will survive and others will be forced to shut down.
Kerri Langlais, Chief Strategy Officer at Bitcoin mining company TeraWulf says:
The price paid for the energy and efficiency of the mining equipme will determine the winners and losers after halving.
Miners with higher costs to mine each bitcoin will have a harder time surviving after the halving. According to data compiled by Wolfie Zhao, Stronghold Digital Mining (SDIG), Cipher Mining (CIFR), and Riot Platforms (RIOT) have the lowest Bitcoin mining costs. According to this data, the cost of mining each bitcoin in the first quarter of 2023 for Stronghold was about $8,200, Cypher was about $8,600, and Rivet was about $10,400.
The importance of productivity
Bill Papanastasiou, an analyst at Stifel Investme Bank, wrote in a note in late May:
Due to the possible decrease in mining profit margins, miners have developed strategies to preserve capital, increase equipme productivity, and diversify their investme.
In general, the industry has focused on increasing the efficiency of mining machines and operations, as opposed to increasing the hash rate more and more like what happened during the 2021 bull market.
Ethan Vera, CEO of Luxor Technologies mining services company, also said about this:
Immediately after the halving, the hash rate of the network will decrease dramatically, but in the following mohs we will see its growth very slowly; Because efficie miners will replace older miners and this will change the game in favor of miners who have the lowest mining cost.
New investmes
Papanastasiou noted:
Additionally, given the uncertaiy surrounding mining economics next year, miners have become more cautious about investing in new equipme. Currely, the cost of investing in the digital currency mining industry is twice that of investing in the precious metals sector.
It may seem irrational to underinvest in this sector, especially given the coinued increase in hash and network difficulty during the bear market of the past few mohs. Both of these indicators, which are key measures for calculating the profitability of miners, have repeatedly reached a new stagnation in 2023.
But do not forget that the increase in the hash rate can reflect the economic conditions a few mohs before. Since the developme of mining facilities takes several mohs, the rece increase in the hash rate largely reflects the investmes made in previous periods.
B Riley analyst Lucas Pipes wrote in a note to investors:
However, discussions about the developme of new mining facilities in 2023 have increased. The state of investme in the industry to build new units is down compared to 2021, but has improved from the fall of 2022, when the price of Bitcoin reached its lowest level of around $15,000.
An increase in the price of Bitcoin or a sharp drop in the price of energy can increase the profitability of miners in such a way that they no longer have to shut down their activities after halving. Bloomberg Ielligence and Matrixport announced that halving has the poteial to increase the price of Bitcoin by 81%.
Langlais noted:
Historically, the price of Bitcoin always rises significaly after a halving eve. Of course, time will tell what will happen in this cycle.
