Sat 13 April 2024 ▪
6
min reading ▪ acc
Only 1000 blocks left before the halving. Will this raise the price of Bitcoin? Or not… How will this impact the mining industry?
Bitcoin Up or Down After Halving?
It goes without saying that a reduction in Bitcoin supply can only be bullish. But we will not see a sudden increase in Bitcoin. For three reasons.
The first is the good old adage, “Buy the rumor and sell the news”. We recently showed this on ETFs.
The second is related to the volumes of Bitcoin mined compared to the volumes of trades. We will go from 900 BTC mined every day to 450 BTC. This is much less than the daily volumes that average 24,000 BTC.
Half of the 21 million bitcoins were produced in the first four years. Then another 25% during the second cycle, 12.5% during the next cycle and 8.4% during the final cycle ending on April 19th.
And only 4.2% of the 21 million Bitcoins will be produced during the next 210,000 blocks. In other words, this halving will clearly be less effective than the previous ones.
Third, a lot will depend on what the miners do. Sure, many miners systematically sell 100% of their bitcoins. Therefore, the supply will necessarily decrease from these “natural” sellers, which are the miners.
Heavyweights such as Cleanspark, Riot or Marathon are far from selling the entire crop. So the supply of bitcoins from these giants should not change.
That being said, bisection is absolutely no event. That 450 bitcoins a day is $12 billion a year. That’s exactly the net amount absorbed by the ETF since January 11th with a 60% appreciation in Bitcoin!
In short, the impact of the halving is exponentially weaker, diffuse, but still significant.
Increase or decrease hashrate?
Hashrate dropped by 25%, 11% and 25% immediately after the first three halves. What is certain is that we will see a decline next week.
JP Morgan analysts expect a 13% decline. CleanSpark CEO Matt Schultz believes the hash rate will collapse by 30%.
Why ? Because many ASICs will no longer be profitable. For example Antminers S17, or even S9.
At $0.08 per kWh, the S17 will need $108,000 in Bitcoin to break even. S9 will need an electricity price of $0.02 and Bitcoin over $63,000 to be profitable.
Don’t miss our article on this topic: Bitcoin – Which ASICs will remain profitable after the halving?
All non-performing machines will irretrievably disappear from circulation. Therefore, the expectation of a drop in the hashrate, which will certainly be short-lived.
We can bet that we will be back to the top level in less than two months. The industry is booming and around 70% of the hashrate was deployed after January 2022. We are now well above 600 EH/s:
Miners have to be smart
Data from CoinMetrics shows that most of the industry is currently running on relatively inefficient ASICs like the Antminer S19J Pro. After halving, this model will need an electricity price below $0.05/kWh to maintain attractive margins.
Bitmain launched its new ASICs (S21, T21 and S21 Pro – each with an efficiency of less than 20 J/TH) just in time for the halving.
At $70,000 per bitcoin, S21 remains profitable even with a kWh at $0.14. In other words, it is impossible to mine in France even with the latest generation models.
Also note that MicroBT Whatsminers perform better than Bitmain Antminers in higher or lower than average temperature conditions.
Our article on this topic: Bitcoin – Whatsminer M60 vs Antminer S21.
Buying the latest ASICs is of course recommended. In the end, these machines will earn you more sats. But that’s not a viable strategy. Anyone can buy these ASICs, but not everyone benefits from cheap electricity.
Another strategy is overclocking with immersion cooling. After that, it is possible to increase the output of the S19 Pro from 104 TH/s to 140 TH/s, or +34%. Cleanspark even offers profits of up to 85%:
The third strategy is to use the heat generated by the ASIC. For example, to heat water for a fish farm. The possibilities are numerous. Miner Jaran Mellerud explains:
“In Finland, we have diversified our income by selling the heat produced by our ASICs to a district heating system. We also receive money for a contribution to the stabilization of the electricity network by relieving the network at peak demand. These secondary sources of income significantly strengthen the profitability of our business. »
We can bet that miners will be full of ideas on how to improve their margins. Bisection is merciless…
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DISCLAIMER OF LIABILITY
The comments and opinions expressed in this article are solely those of the author and should not be considered investment advice. Before making any investment decision, do your own research.