Key Points
- Bitcoin mining profitability may not decline following the upcoming Bitcoin halving, says Acheron Trading CEO Laurent Benayoun.
- Increased network fees may compensate for the halving of Bitcoin supply issuance.
Bitcoin halving, a process that reduces the supply issuance of Bitcoin by 50%, may not necessarily lead to a drop in mining profitability. Laurent Benayoun, CEO of Acheron Trading, suggests that the decrease in mining rewards may be offset by an increase in network fees.
Bitcoin Halving and Network Fees
The upcoming Bitcoin halving, set for April 20, will reduce block issuance rewards from 6.25 BTC to 3.125 BTC. Past halvings have resulted in smaller mining firms exiting the industry due to decreased block rewards. However, Benayoun believes the 2024 halving will be different due to the rise in network fees, spurred by Ordinals inscriptions and Bitcoin-native decentralized finance (DeFi), also known as BTCFi.
Bitcoin network fees are transaction charges paid to incentivize miners to include a transaction in the next block. The average Bitcoin transaction fee is currently $4.88 per transaction, a decrease from $16.13 per transaction a month ago. However, Bitcoin transaction fees have risen by over 86% in the past year.
Profitability and Bitcoin Price
For Bitcoin mining companies to remain profitable, the Bitcoin price would need to stay above the $70,000 mark. Joe Downie, CMO of NiceHash, says that most miners will continue to be profitable if the price holds above $70,000, as they are currently profitable at a BTC price of over $35,000.
The profitability of a mining firm also depends on the quality and energy efficiency of its mining equipment. According to Downie, Bitcoin halvings can make older hardware less profitable due to reduced rewards for the work done by the machine. However, newer, more energy-efficient models will continue to be profitable.
On March 6, Bitcoin miner revenue recorded its second-highest day in history, reaching $75.9 million a day after the Bitcoin price hit a new all-time high above $69,200. Benayoun believes that fewer mining firms will be forced out of business in this cycle due to the increase in network fees.
