Bitcoin Miners Struggle to Maintain Operations Ahead of Halving
This year’s Bitcoin halving will reduce the mining reward to 3,125 BTC, putting miners’ profitability at risk. CryptoQuant reports a 30% drop in miners’ hash price since the last halving, with a further decline expected. Competition and costs rise, and the Bitcoin network hashrate reaches 600 EH/s, affecting profits.
In approximately 10 days, the Bitcoin community will witness a significant event: The Bitcoin halving. This phenomenon will halve the reward for mining a Bitcoin block, from 6.25 to 3.125 BTC, putting pressure on miners’ profitability.
Miners are now in a race against time, needing higher Bitcoin prices to maintain their profits.
Reasons Why Bitcoin Miners Will Face Challenges
According to a CryptoQuant report shared with BeInCrypto, miners’ hashrate has fallen 30% since the last halving in May 2020. Currently valued at $0.11 per Terahash per second, this figure is about to fall to $0.055 after the halving, assuming stable market conditions:
“The hash price is the average income a miner earns each time they try to find a valid block of Bitcoin,” CryptoQuant stated.
Additionally, Bitcoin transaction fees have seen a dramatic decline. They plummeted from 412 Bitcoin per day in mid-December 2023 to just 29 Bitcoin, a 90% reduction.
Currently, transaction fees contribute only 3% to the total block reward, which is a significant decrease from 37% in mid-December 2023. Additionally, competition between miners has reached unprecedented levels.
The Bitcoin network hashrate, which indicates total computing power, has skyrocketed to 600 exahashes per second (EH/s), up from 116 EH/s since the last halving. This increase means that miners must work harder and use more resources to mine the same amount of Bitcoin, and the cost of mining, or hashcoin, has increased tenfold since May 2020.
In response to these challenges, some miners have stepped up their Bitcoin selling activities. For example, daily sales to over-the-counter (OTC) desks reached 1,600 BTC in late March, the highest figure since August 2023.
At the same time, Bitcoin reserves held by miners have been on a steady downward trajectory over the past year. A significant sell-off by Bitcoin miners may, in fact, put pressure on the price of Bitcoin.
Not All Mining Companies Battle for Bitcoin Halving
Despite the abovementioned difficulties, not all mining companies are struggling. While major players like RIOT Platforms, Core Scientific, Bitfarms, and Marathon Digital have reported declines in Bitcoin production, CleanSpark has seen an increase. Such variation highlights the different effects of market dynamics and operational problems on mining companies.
However, Sheraz Ahmed, managing partner at Storm Partners, offers a different perspective. He maintains that the mining industry does not need special preparation for the halving, since market forces will end up stabilizing the situation. Ahmed explained to BeInCrypto the following:
“Miners get less Bitcoin for a similar amount of mining, but the price should reflect this, or the hash rate can stabilize on its own, becoming almost the perfect market. Any discrepancies can be rebalanced. It’s similar to gold, so I don’t think you have to prepare for it any more than anything else.”
Halving cases in the past support Ahmed’s opinion. The total daily revenue of the Bitcoin mining industry has reached new highs in 2024, with a record of $79 million on March 6 and $67 million today. This is 3.5 times higher than revenue just before the May 2020 halving.
Such figures suggest that despite the immediate challenges, the industry may find a new balance after the halving.
By Leonardo Perez