Markets wary of Bitcoin halving in April
ALBAWABA – Crypto traders, miners and enthusiasts are looking out for Bitcoin’s long-anticipated halving event, in April 2024, to extend the market rally, Bloomberg reported Sunday.
Bitcoin has been rising in 2023 and has nearly doubled in value in the first six months. But the “halving” of the Bitcoin cryptocurrency, promises a massive surge in value.
Once every four years, the halving rewrites the underlying code of the world’s biggest and first cryptocurrency and slashes the amount of bitcoins miners can earn.
Miners earn bitcoins validating transactions on the digital asset’s blockchain using specialized, energy-intensive computers.
The last three halving occurrences in 2012, 2016 and 2020 saw Bitcoin jump nearly 8,450, 290 and 560 percent a year on, according to Bloomberg.
April’s upcoming halving will cut miners’ rewards to 3.125 Bitcoin per block — or $94,438 — from the current 6.25 or $188,876.
Scarcer bitcoin supply is seen by crypto proponents as helping to maintain Bitcoin’s value in the long run. Or at least until the maximum number of tokens that can ever be mined — 21 million — is reached around the year 2140.
Bitcoin halving concerns
Despite the bitcoin halving typically boding well for crypto markets, mining economics this time look more troubling.
“Nearly half of the miners will suffer given they have less efficient mining operations with higher costs,” Jaran Mellerud, crypto-mining analyst at Hashrate Index, told Bloomberg.
Electricity prices are expected to drop to $0.06 per kilowatt-hour from $0.12 after the halving, he underlined.
Meanwhile, around 40 percent of miners still have higher operating costs per kWh than that, Mellerud said.
Miners with operating costs above $0.08 per kilowatt-hour will struggle to stay afloat, as will smaller miners who do not run their own mining rigs but outsource them instead, he further explained.
“If you count in everything, the total cost for certain miners is well above Bitcoin’s current price,” added Wolfie Zhao, head of research at TheMinerMag.
TheMinerMag is a research arm of mining consultancy BlocksBridge.
“Net profits will turn negative for many miners with less efficient operations,” he said.
Bitcoin has rallied more than 80 percent this year to around $30,000, though the price is still less than half the record of almost $69,000 reached in late 2021.
Rising competition among Bitcoin miners has also compressed profit margins, according to Bloomberg.
Mining difficulty, a measure of computing power to mine Bitcoin, hit a record high in June, data from btc.com showed. And for miners to keep the same profit margins after the halving, Bitcoin’s price will have to rise to $50,000-$60,000 next year, Kevin Zhang told Bloomberg, senior vice president of mining strategy at crypto-mining firm Foundry, which is owned by industry heavyweight Digital Currency Group.
The bitcoin halving is ultimately expected to double Bitcoin’s production cost to about $40,000, JPMorgan Chase & Co. strategists led by Nikolaos Panigirtzoglou wrote in a June 1 note.
The cost of producing one Bitcoin ranged between about $7,200 to $18,900 in the first quarter across a group of 14 publicly-listed miners, Bloomberg reported.
