Bitcoin Halving To Raise ‘efficient’ BTC Mining Costs To

 

Bitcoin Halving To Raise ‘efficient’ BTC Mining Costs To $30K

Bitcoin (BTC) Ordinals are boosting miner profits, but “income stress” is looming, new research warns.

In the latest edition of its weekly newsletter, “The Week On-Chain,” analytics firm Glassnode predicted fresh problems for miners after Bitcoin’s next block subsidy halving.

Bitcoin halving impact on miners could be “severe”

Bitcoin miner competition is exploding, with hash rate — the estimated combined processing power deployed to the blockchain — at record highs.

For Glassnode, this indicates unprecedented conditions for miners trying to eke out a living at current BTC price levels.

Ordinal inscriptions are helping, with these acting as “packing-filler” which turns empty blockspace into a source of revenue for miners.

“Naturally, as blockspace demand increases, miner revenues will be positively affected,” it wrote.

Bitcoin Mean Hash Rate (7-day moving average) chart (screenshot). Source: Glassnode

The proportion of income received from fees has increased between 1% and 4% compared to lows seen during Bitcoin bear markets, but by historical standards remains modest.

“Meanwhile, the amount of hashrate competing for these rewards has increased by 50% since February, as more miners, and newer ASIC rigs are established and come online,” “The Week On-Chain” notes.

This hash rate spike is laying the foundation for an upcoming showdown. In April 2024, miner rewards per block will drop 50%, doubling the so-called “production cost” per BTC. Currently around $15,000, this will pass $30,000 — above the current spot price.

Glassnode presented two models for estimating the price at which miners, on aggregate, fall into the red, with the above comparing issuance to mining difficulty.

“By this model, we estimate that the most efficient miners on the network have an acquisition price of around $15.1k,” researchers explained.

“However, the purple curve shows the post-halving ‘doubling’ of this level to $30.2k, which would likely put the majority of the mining market into severe income stress.”

Bitcoin Difficulty per Issuance Pricing Model (screenshot). Source: Glassnode

A previous model put the average miner acquisition price at $24,300 per Bitcoin — around 8% below spot as of Sept. 28.

Bitcoin Difficulty Regression model (screenshot). Source: Glassnode BTC price incentives

Others are more optimistic about how miners will handle the build-up to the halving.

Related: Bitcoin exchange volume tracks 5-year lows as Fed inspires BTC hodling

In an interview with Cointelegraph this month, analyst Filbfilb, co-founder of trading suite DecenTrader, reiterated that miners would up BTC accumulation in advance of the event.

“Miners are incentivized to ensure that prices are well above marginal cost prior to the halving,” he wrote in an X (formerly Twitter) thread in August.

“Whether they collude consciously, or not they are collectively incentivized to send prices higher before their marginal revenue is effectively halved.”

BTC/USD chart with miner accumulation data. Source: Filbfilb/X

Assisting BTC supply dynamics will be what Filbfilb calls smart money “buying the rumor” over the halving and its own impact on the amount of BTC being minted.

Collect this article as an NFT to preserve this moment in history and show your support for independent journalism in the crypto space.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin Halving 2024 – What You Need To Know

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The available supply of conventional currencies rises and falls under the watchful eyes of national central banks, but the total supply of Bitcoin is fixed and immutable.

There will only ever be 21 million Bitcoin. Presently a bit more than 19 million have been mined, leaving just under 2 million left to be created. The Bitcoin protocol automatically reduces the number of new coins issued with each new block in a process called halving.

“One of the most important features of Bitcoin is its limited supply and issuance mechanism,” says Bruce Fenton, CEO of fintech company Chainstone Labs.

Bitcoin halving explained

The Bitcoin halving is when the reward for Bitcoin mining is cut in half. Halving takes place every four years.

The halving policy was written into Bitcoin’s mining algorithm to counteract inflation by maintaining scarcity. In theory, the reduction in the pace of Bitcoin issuance means that the price will increase if demand remains the same.

“Bitcoin’s production scarcity is what defines its finiteness, and when reward goes down, supply is constrained,” says Chris Kline, chief operating officer of Bitcoin IRA. “Increasing demand at a time when supply is constrained has a positive impact on price, which can make bitcoin alluring to investors.”

How does Bitcoin halving work?

A decentralised network of validators verify all Bitcoin transactions in a process called mining. They are paid 6.25 BTC when they are the first to use complex math to add a group of transactions to the Bitcoin blockchain as part of its proof-of-work mechanism.

At the current Bitcoin price, 6.25 BTC is worth about £87,000, a decent incentive for miners to keep adding blocks of Bitcoin transactions running smoothly.

Those blocks of transactions are added roughly every 10 minutes, and the Bitcoin code dictates that the reward for miners is reduced by half after every 210,000 blocks are created. That happens roughly every four years in periods that are often accompanied by heightened Bitcoin price volatility.

When was the first Bitcoin halving?

The first Bitcoin halving occurred in November 2012. The next halving was in July 2016, and the most recent halving was in May 2020.

The reward, or subsidy, for mining, started out at 50 BTC per block when Bitcoin was released in 2009. The amount drops in half each time a new halving takes place. For instance, after the first halving, the reward for Bitcoin mining dropped to 25 BTC per block.

The last halving will occur in 2140. At that point, there will be 21 million BTC in circulation and no more coins will be created. From there, miners will just be paid with transaction fees.

Richard Baker, CEO of miner and blockchain services provider TAAL Distributed Information Technologies, points out that miners may shift transaction processing power away from BTC once the next halving takes place as they seek more transaction fees elsewhere to make up for lost Bitcoin revenue.

Fewer miners would mean a less secure network, experts say.

On the other hand, while the halving reduces the reward for miners, it equally lowers the supply of new coins without reducing the demand, notes Patricia Trompeter, CEO of cryptocurrency miner Sphere 3D Corp.

“If the economic theory holds true, which historically for Bitcoin it has, Bitcoin prices should increase dramatically in response to the supply shock,” she says. “Although, there is still debate on whether the historical price movement around each halving was a direct product of the halving.”

Higher prices would be an incentive for miners to keep processing Bitcoin transactions.

History of Bitcoin halvings

The number of new Bitcoins issued as a reward for miners who add a new block of validated transactions to the Bitcoin’s blockchain has halved every four years since 2009.

The initial reward was 50 BTC, which would be worth more than £1,000,000 today. Presently, the reward is 6.25BTC, equal to roughly £136,000.

Here’s how the reward has lessened every four years since Bitcoin began:

When is the next Bitcoin halving?

The Bitcoin algorithm dictates halving happens based on a certain creation of blocks. Nobody knows exactly when the next halving will occur, but experts point to April/ May 2024 as an anticipated date. That would be almost exactly four years since the last one.

The somewhat predictable nature of Bitcoin halvings was designed so that it’s not a major shock to the network, experts say.

But that doesn’t mean there won’t be a trading frenzy surrounding Bitcoin’s next halving.

“Historically, there is a lot of Bitcoin price volatility leading up to and after a halving event,” says Rob Chang, CEO of Gryphon Digital Mining, a privately held Bitcoin miner. “However, the price of Bitcoin typically ends up significantly higher a few months after.

While there are many other factors influencing Bitcoin’s price, it does seem that halving events are generally bullish for the cryptocurrency after initial volatility eases.

Baker says investors should be cautious about the next Bitcoin halving. Although scarcity can drive price appreciation, reduced mining activity could cause the price to level off.

“The key point for investors to consider, however, isn’t the specific dates of halving events but to focus on the growth of the network overall,” Weisberger says. “As long as the network continues to grow, the likelihood of Bitcoin fulfilling its potential as a global store of value increases.”

How to trade the bitcoin halving

Each time Bitcoin goes through a halving, the rate of supply effectively halves too. When demand levels for an asset remain constant but supply is reduced, the asset tends to appreciate in value.

Traders may seek to exploit this dynamic by investing in Bitcoin ahead of next April’s anticipated halving, in hopes it will increase the value of their holdings.

How has bitcoin halving impacted BTC’s price in the past?

When the first halving happened in 2012, there was a negligible effect on Bitcoin’s value, but this was in the cryptocurrency’s early days, before rampant speculation began.

In the year ahead of the second halving in 2016, however, Bitcoin went from around £170 to just over £500 (up 194%).

In the 12 months leading up to the May 2020 halving, Bitcoin rose from around £4,000 to roughly £8,000, marking a 100% increase in value.

We’re now within 12 months of the next halving. In April 2023 Bitcoin was valued at approximately £23,000. Since then, BTC has gone up and down and currently sits at around £21,000.

While previous pre-halving periods have seen tremendous growth, early indications show this one may be different. Regardless, past performance is no indication of future results.

Frequently Asked Questions (FAQs) Why does bitcoin halve?

Bitcoin was designed to halve every four years in order to maintain scarcity as a counterbalance to inflation. The idea is that reducing supply against a backdrop of sustained demand would drive BTC prices up, protecting against the way inflation devalues assets.

What happens when all 21 million Bitcoins have been mined?

Once the last of the total 21 million Bitcoins have been mined, miners who successfully add blocks of validated transactions to the blockchain will be rewarded with transaction fees, rather than newly minted BTC. It’s predicted the 21 million limit will be effectively reached by 2140.

What will BTC's price be after the halving?

After the next halving in April 2024, the mining reward will fall from 6.5 BTC to 3.125 BTC.

This Trader’s Bitcoin Price Prediction Sees BTC Hit A New ATH Before 2024 Halving, While BTC BSC Token Nears $3 Million

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Bitcoin (BTC) has seen tremendous volatility in 2023, rising sharply in June before falling 16% in the following weeks.

As the next halving approaches in 2024, one trader predicts that the world's largest cryptocurrency could reach a new all-time high before the event occurs.

With new altcoins like Bitcoin BSC (BTCBSC) also gaining momentum, the crypto market appears primed for an exciting few months ahead.

Bitcoin bounces back above $25k as bulls take control

Bitcoin has begun picking up momentum in recent weeks, rebounding from the support level located at $25,000.

Since that rebound six days ago, BTC's value has risen nearly 6%, erasing most of the losses sustained in the ten days prior.

Now, Bitcoin is hovering around $26,710, having posted its first bullish weekly close since early August.

Price has climbed above the 20-day Exponential Moving Average (EMA) on the daily chart and appears to be heading for a test of the 50-day EMA in the coming days.

Additionally, the Crypto Fear & Greed Index has ascended to 46 – significantly higher than its value last month.

These indicators suggest that investor sentiment regarding Bitcoin is turning positive once more.

If BTC can break above the 50-day EMA convincingly, it could pave the way for further upside in the near term.

Crypto analyst BitQuant believes new all-time high is inbound before 2024 halving

According to prominent crypto analyst BitQuant, Bitcoin could be poised to reach a new all-time high before its next halving event in April 2024.

In a recent post on X, BitQuant stated that BTC will likely surpass its current record high of nearly $69,00rel="nofollow" 0 sometime in the next six months.

However, BitQuant believes that Bitcoin will not stop at this pre-halving peak – instead, he predicts BTC will continue rallying after the halving and hit the $250,000 level later in 2024.

BitQuant’s bullish outlook aligns with historical price trends surrounding Bitcoin halving events.

The supply shock typically causes FOMO among investors, prompting increased demand (and price). 

With the block reward set to be cut in half in just over six months, many investors (including BitQuant) believe scarcity could drive BTC well above its previous all-time high.

New BTC clone Bitcoin BSC also bullish as token raises $2.7m in presale & nears soft cap goal

With Bitcoin gaining momentum, the stage may be set for a broader crypto market rally in the months ahead.

This presents an opportunity for investors to get in early on promising new projects – with Bitcoin BSC emerging as one of the most notable contenders in the space.

Built as a BEP-20 token on the Binance Smart Chain, Bitcoin BSC (BTCBSC) aims to simulate Bitcoin’s original block rewards and distribution schedule.

However, instead of using energy-intensive mining, Bitcoin BSC uses a sustainable staking model to reward holders with BTCBSC tokens.

According to Bitcoin BSC’s staking dashboard, over 1.3 million BTCBSC tokens have been staked already, with holders able to obtain estimated yields of 192% per year.

Bitcoin BSC's presale has already raised over $2.7 million towards its $3.96 million soft cap goal as hype begins to build around this innovative token.

The token has been featured in Cointelegraph, Yahoo Finance, and other major crypto news outlets – signifying its growing recognition and potential.

With presale tokens priced at just $0.99, matching Bitcoin’s price in 2011, Bitcoin BSC looks to offer substantial upside potential if it sees even a fraction of the growth experienced by BTC.

Unsurprisingly, this unique setup has caught the attention of the crypto influencer community, with Jacob Bury stating he believes it could have “10x potential”.

As an ambitious new project on the Binance Smart Chain, Bitcoin BSC checks all the boxes for crypto investors seeking exposure to a token with significant growth potential – positioning it as one to watch in the remaining months of 2023.

Visit the Bitcoin BSC Presale

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