We wrote about it several times in the past week, and this frequency will only increase in the coming months: the upcoming Bitcoin halving. The Bitcoin halving takes place every four years and next spring it will be that time again. During the halving, so-called ‘block rewards’ will be halved for miners. For many investors, the halving can’t come soon enough. The halving often corresponds to a sharp rise in the price of bitcoin (BTC). For miners, however, this is a different story.
Bitcoin halving will be a stress test
Last week we wrote that based on current data, half of all bitcoin miners will not survive the halving. This has to do with the rising cost per bitcoin mined. Halving the rewards per block also means that it takes twice as much work, time and energy to mine a bitcoin.
Miners are in this parquet every four years during the halving, but this time the circumstances are extra tough. The last bear market was longer and heavier than the previous one. Electricity prices are also historically high. On top of that comes a very tough competition among miners. According to the American bank JPMorgan, the upcoming Bitcoin halving is a ‘stress test’ for the bitcoin miners.
“The upcoming Bitcoin halving in April/May 2024 could become a stress test for miners. It will halve the rewards (per block) from 6.25 to 3.125 BTC. This means a decrease in income for miners, while at the same time increasing production costs. As a result, the halving is seen as a positive impact on price as production costs act as a floor, but it is a challenge for miners.”
40 thousand dollars per BTC?
According to the analysis in the bank’s report, it currently costs $20,000 to mine a bitcoin. This is based on an average global electricity price of $0.05 per kWh. Based on this data, we can expect a Bitcoin value of at least $40,000 after the halving, provided energy costs remain constant.
But there is also good news for BTC miners: in recent months, institutional investors have shown more interest in the crypto mining industry. Funds including Galaxy Digital and Grayscale Investments have already invested in the mining sector.
