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The next Bitcoin (BTC) halving, the most anticipated quadrennial event in the cryptocurrency industry, could push the digital currency’s initial price to new heights, making it the last time for Bitcoin miners. could be a bigger problem than
Bitcoin miners will face additional challenges in the upcoming April 2024 halving, given high electricity costs and debt burdens, according to mining experts.
“Nearly half of the miners will be in trouble as they end up with expensive and inefficient mining operations,” said Jalan Mereld, a cryptocurrency mining analyst at Hashrate Index. bloomberg.
Once every four years, the reward for successfully mining a Bitcoin block is cut in half. This event, called the halving, will reduce inflationary pressure on cryptocurrencies. Currently, the reward per block is 6.25 BTC ($188,944 at time of writing), but the next halving in Q2 2024 will further reduce it to 3.125 BTC per block ($94,472 at time of writing).
Previous Bitcoin halvings have been followed by massive bull markets, the most recent of which saw the price of the world’s largest cryptocurrency rise 560% in 2020. As a result, many investors welcomed the event.
So far, Bitcoin miners have compensated for the loss of mining rewards after the halving by improving mining efficiency due to technological advances. However, the report noted that the upcoming halving is a “risk of ringing death knell” for some miners.
According to Mellerud, the break-even electricity price for major mining machines is projected to drop from 12 cents/kWh to 6 cents/kWh after the halving. However, his 40% of miners have operating costs above the threshold.
“Miners with operating costs in excess of 8 cents per kilowatt-hour will struggle to stay afloat. Also, smaller miners who do not operate their own mining rigs but outsource them. It is the same.”
Increased miner production cost
Wolfie Chao, head of research at The MinerMag, the research arm of mining consultancy Bloxbridge, said the bottom line would be negative for many BTC miners with low operating efficiencies.
This is because the Bitcoin mining industry is operating in debt, partly due to the impact of the 2022 bear market on electricity costs. The global mining industry now has between $4.5 billion and $6 billion in debt, down from $8 billion in 2022, according to Ethan Vera, COO of Luxor Technologies.
In addition, increased competition among Bitcoin miners is also leading to lower profit margins.
Foundry senior vice president Kevin Chan said the price of BTC would need to rise from $50,000 to $60,000 next year to maintain the same profit margins for miners.
maintain half-life
Despite all these challenges, bitcoin miners are “trying to be more sophisticated with their power costs and trying to secure prices from power companies in advance,” as they prepare for the halving, Chan added.
Additionally, miners are implementing strategies such as fixing electricity prices, increasing military spending, and reducing investment to protect themselves from the impact of the halving.
For example, recently Riot Platforms clearly Prior to the halving, the company plans to acquire 33,000 new Bitcoin miners to expand its mining capacity. “By adding these miners, Riot Platforms aims to increase mining capacity and profit potential,” the company added.