Bitcoin Mining Profitability Unaffected by Halving, Thanks to Rising Network Fees, Claims Acheron CEO
Summary:
Despite the upcoming 50% reduction in Bitcoin (BTC) issuance in the Bitcoin halving, Acheron Trading's CEO, Laurent Benayoun, suggests that Bitcoin mining profitability might not necessarily decrease. The decline in mining rewards could be counterbalanced by increased network fees, he argues. Network fees have steadily risen with the emergence of Bitcoin-native decentralized finance (BTCFi) and Non-fungible tokens (NFTs) and sustained Bitcoin miner profitability largely depends on the Bitcoin price remaining above the $70,000 mark. However, the Bitcoin price and the energy efficiency of mining equipment also play a crucial role.
Despite the imminent 50% reduction in Bitcoin (BTC) supply issuance in the Bitcoin halving, Laurent Benayoun, Acheron Trading's CEO, argues that Bitcoin mining profitability may not necessarily take a hit. Contrary to expectations, he notes that the drop in mining rewards might be offset by an upswing in network fees, hence miners' earnings in dollar terms might not dwindle.
The Bitcoin halving, scheduled for April 19, is set to cut block issuance rewards from 6.25 BTC to 3.125 BTC. In the past, such halvings resulted in smaller mining entities shutting down due to reduced rewards. But Benayoun suggests the landscape may change post the 2024 halving, thanks to the surging network fees propelled by rising Bitcoin-native decentralized finance (BTCFi) and Ordinals inscriptions.
Transaction fees on the Bitcoin network, aimed at incentivizing miners to include a transaction in the subsequent block, have seen a steady rise recently due to the emergence of Non-fungible tokens (NFTs) and projects focused on Bitcoin's DeFi. The average Bitcoin transaction fees currently stand at $4.88 per transaction, a marked decrease from the $16.13 per transaction a month ago (March 5). Over the past year, Bitcoin transaction fees have increased by over 86%.
The profitability of Bitcoin mining companies largely hinges on the Bitcoin price exceeding the $70,000 mark, as per Joe Downie, chief marketing officer of NiceHash. He observes that miners continue to turn a profit with the current block rewards, provided the BTC price remains above $35,000. However, a dip below that would likely plunge them into losses.
The price of Bitcoin dipped 4.3% over the last week, settling at $66,851 as of 10:22 am UTC. It has been trading under the $70,000 mark since April 1.
Downie adds that the profitability of a mining firm also depends on the quality and energy efficiency of its mining equipment, as Bitcoin halvings render older, less energy-efficient hardware less profitable.
Bitcoin miner revenue recently had its second-best day, pulling in $75.9 million on March 6, as Bitcoin's price soared to a record high, exceeding $69,200. Benayoun predicts fewer mining companies will go under this time around than in past cycles, due to Bitcoin's price surge and the escalating network fees.
Published At
4/9/2024 12:43:21 PM
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