Bitcoin Halving Implications: U.S. Miners May Face Profitability Crisis, Triggering Global Shift
Summary:
The Bitcoin halving on April 24 could provoke a significant downturn in the share prices of costly U.S.-based public miners, instigating a possible shift towards cheaper overseas mining operations. This result hinges on whether Bitcoin's price will significantly rise after the halving. Analysts predict a migration of Bitcoin's hash rate from the U.S. to regions with lower electricity costs, like Africa and Latin America. Despite recent concerns about post-halving profitability, only a third of recorded mining firms are expected to fall below the profitability threshold at Bitcoin's current price.
The upshot of sluggish Bitcoin prices in the aftermath of the Bitcoin halving could lead to a plunge in stock values of costly public miners based in the U.S., sparking a potential relocation towards more cost-efficient territories overseas. The impact could be profound, resulting in a volatile climate amongst cryptocurrency investors who realize these firms are barely in the black, according to Hashlabs Mining's founder and head of mining strategy, Jaran Mellerud. Potential implications of Bitcoin's (BTC) lack of substantial price increase post-halving are drawing Mellerud's attention to the months following the event, as he anticipates cuts in block rewards could take a toll on miner profitability.
Presently, the top #bitcoin mining nations include:
1) The United States (40%)
2) China (15%)
3) Russia (12%)
However, this landscape may see recognizable shifts within the next two years as mining operations in Africa and Latin America increase their stakes in the game. With that said, ⛏️ Bitcoin mining rigs will aggressively pursue the most financially viable locations. [@TBG9270584, February 17, 2024.]
CoinMarketCap forecasts the next Bitcoin halving to take place on April 24. This event will cut Bitcoin miner rewards in half from 6.25 BTC ($321,000) to 3.125 BTC ($160,500). Historically, such events are followed by a considerable spike in the price of Bitcoin. The previous halving on May 11, 2020, witnessed Bitcoin's price climb over 430% from $8,750 in October to $61,300 by mid-March 2021. That said, should Bitcoin fail to experience a substantial boost in this period, a major portion of the network, particularly those with high energy costs, may be forced to switch off their machines. This could lead to a substantial migration of Bitcoin’s hash power from the U.S. to jurisdictions with cheaper electricity, particularly in Africa and Latin America. Mellerud anticipates several U.S.-based miners relocating their operations to countries like Ethiopia, where hosting rates are significantly cheaper.
Concerns over post-halving profitability re-emerged when Cantor Fitzgerald warned that at the then-existing price of $40k Bitcoin, 11 public Bitcoin miners might not turn a profit. However, with Bitcoin's current price standing at $51,000, less than a third of the 13 recorded mining firms would fall into the category of non-profitable operations. Contrary to Mellerud’s prediction that the majority of inefficient miners are based in the U.S., Mitchell Askew, head analyst at Bitcoin mining firm Blockware Solutions, suggests that they only constitute a small portion of Bitcoin’s total hash rate. Askew points out that most U.S. miners are constrained by contractual obligations that require them to continue operations irrespective of profitability, while others are influenced by the goal to stack non-Know Your Customer Bitcoin, meaning they are less concerned about profitability.
Mellerud identifies Ethiopia, Nigeria, and Kenya as the top African countries poised to benefit from potential mining relocations, expecting Ethiopia to take up 5–10% of Bitcoin's total hash rate within the next few years. He also considers Argentina and Paraguay to be the most promising mining countries in South America. Observing this trend of mining decentralization is of immense interest and could potentially strengthen the Bitcoin network. [Sources: @gladstein, February 7, 2024; Wolf Of All Streets]
Published At
2/24/2024 1:30:00 AM
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