Key Points
- Bitcoin miners anticipate the upcoming halving event and its potential impacts.
- Industry experts predict increased scrutiny over costs, consolidation, and a greater importance placed on transaction fees.
As the halving of Bitcoin draws near, industry insiders speculate on its potential effects on miners. The block subsidy reward is expected to decrease from 6.25 BTC to 3.125 BTC. Isaac Holyoak, Chief Communications Officer at CleanSpark, likens the halving to a season, stating that its practical impacts will only be felt months later, potentially leading to a war of attrition among less efficient miners and increased mergers and acquisitions.
How This Halving Differs
Unlike the previous halving in May 2020, which occurred before a significant rise in Bitcoin’s price, this time, the cryptocurrency’s price has increased by approximately 120% over the last six months. Brian Wright, Galaxy’s Co-Head of Mining, suggests that fewer miners will need to halt operations immediately after the halving. However, he anticipates that miners will become less profitable, leading to a closer examination of discretionary costs.
Adolfo Contreras, Head of Business Development at Bitcoin infrastructure firm Blockstream, believes established miners who have experienced previous halvings and have secured sufficient financing and liquidity should be prepared for the upcoming event.
The Competitive Landscape of Bitcoin Mining
The difficulty of Bitcoin mining, which determines the complexity of mining a new block, rose by 3.9% last week, hitting a record high. Charlie Schumacher, VP of Corporate Communications at Bitcoin miner Marathon Digital, suggests that the industry has already navigated a halving event last year, with Bitcoin’s difficulty rate doubling in 2023. He expects the hash rate to continue climbing as miners replace outdated machines with more efficient equipment.
Industry insiders also predict a trend towards consolidation this year. Greg Beard, CEO of Stronghold Digital Mining, believes that miners who rely solely on acquiring more efficient machines to stay competitive will find themselves at a disadvantage. On the other hand, miners who own their low-cost power are better positioned to thrive in the post-halving environment.
As the halving approaches, transaction fees are expected to become increasingly important for Bitcoin miners. Historically, transaction fees have been a relatively small percentage of the reward received by Bitcoin miners compared to the block subsidy. However, this cycle’s renewed activity on the Bitcoin blockchain and the halving of the subsidy value will make transaction fees increasingly important. Analysts at Bernstein anticipate a strong uptick in transaction fees due to an exponential increase in demand for Layer 1 blockspace.