Key Points
The upcoming Bitcoin halving could result in a downturn for the share prices of high-cost public miners in the U.S., potentially causing some to consider offshore relocation.
Jaran Mellerud, founder and chief mining strategist of Hashlabs Mining, suggests that if the Bitcoin price doesn’t see a significant increase post-halving, we could witness a mining stock blood bath as investors realize these companies are barely making money.
Bitcoin Halving and its Impact
The upcoming Bitcoin halving is expected to take place on April 24, according to CoinMarketCap.
This event will cut Bitcoin miner rewards from 6.25 BTC ($321,000) to 3.125 BTC ($160,500), although historically, it has been followed by a surge in Bitcoin’s price.
If Bitcoin does not experience a significant price increase within three to four months after the halving, Mellerud predicts that a substantial portion of the network may have to shut down their machines, especially those with hosting rates of $0.07 per kWh or higher.
Many of these inefficient miners are based in the U.S., and as a result, Mellerud believes some of Bitcoin’s hash rate may shift to countries with cheaper electricity, particularly in Africa and Latin America.
Hashlabs is currently witnessing significant demand from U.S.-based miners looking to move their machines to Ethiopia, where hosting rates are 30-40% lower than in the U.S.
Concerns over profitability re-emerged in late January when Cantor Fitzgerald reported that 11 publicly listed Bitcoin miners would not mine profitably post-halving if Bitcoin’s price remained around $40,000.
However, with Bitcoin’s current price at $51,000, only four of the 13 mining firms now fall under the profitability threshold.
Despite this, Mitchell Askew, head analyst at Bitcoin mining firm Blockware Solutions, suggests that most U.S. public miners would operate at low enough electricity rates to remain profitable, particularly firms that purchased more efficient machines throughout the bear market.
Askew disagrees with Mellerud’s assertion that most inefficient miners are based in the U.S., stating they only represent a small portion of Bitcoin’s total hash rate.
Therefore, any hash rate loss in the U.S. would be insignificant.
Askew also points out that many U.S. miners are locked into fixed hosting contracts, requiring them to continue mining regardless of profitability, while others mine solely to accumulate non-Know Your Customer Bitcoin and are less concerned with profitability.
According to Mellerud, Ethiopia, Nigeria, and Kenya are the African countries best positioned to capture a larger share of the hash rate should a mining migration event occur.
Particularly, Ethiopia has a “massive hydropower surplus” and is attracting several Chinese miners, with Mellerud predicting the African country to gain 5–10% of Bitcoin’s total hash rate over the next few years.
In South America, Argentina and Paraguay are identified as the most promising mining countries.
The trend of mining decentralizing away from the U.S. towards countries in Africa, Latin America, the Middle East, and Asia is worth monitoring, as it could make the Bitcoin network much more robust.
