Bitcoin Halving, Mining Profitability, and Speculation: Understanding their relationships (2024)

FAQs

Bitcoin Halving, Mining Profitability, and Speculation: Understanding their relationships? ›

Bitcoin mining rewards halve approximately every four years, challenging profitability and incentivizing more efficient mining practices. Halving events decrease miner

“Miners need their revenues to be more than their costs, like any business,” Malekan says. “What is likely to happen after the halving is that some miners will no longer be profitable, and they will stop mining.”

Effects of Bitcoin halving

As the mining rewards per block halves, the supply of new coins becomes less. As a result, the price of each coin increases. The reward for miners may be less than before, but the increase in the coin's value makes up for it.

What will the impact be on the bitcoin price? Halving reduces the supply of new bitcoins, which should in theory increase the price. It is an economic axiom that if demand for an asset remains stable while its supply decreases, its price should go up.

Bitcoin halving means miners receive 50% fewer bitcoins per completed block, making Bitcoin mining less lucrative. But halvenings historically lead to Bitcoin price increases, incentivising miners to keep mining despite the lower reward.

“On the other hand, miners who own their low-cost power are better positioned to thrive in the post-halving environment, as their operational costs will be lower, allowing them to be more flexible with their capital.”

Many investors have high expectations for halvings because, in the past, prices generally trended upward after the event. However, the trends historically moved slowly, over months and years until the next halving, and there is no guarantee that Bitcoin will follow the same trajectory.

Using these data, we conclude that since June 2018 Bitcoin mining is no longer profitable for commodity miners without access to electricity prices below 0.14 $/kWh. This phenomenon explains why many Western miners have dropped out of the circuit, further increasing the centralization of mining activity in China.

Consider this: if it were universally anticipated that bitcoin's value would surge immediately following the 2024 halving, investors would likely move to acquire bitcoin before the event, driving up its price in the present rather than in the future.

The upcoming 2024 halving will see this reward decrease from 6.25 BTC to 3.125 BTC per block, a change that aims to reduce Bitcoin's inflation rate and enhance its scarcity.

How much will 1 bitcoin be worth in 2025? ›

The average bitcoin production cost post-halving is about $53,000. Some miners are actively managing financial liabilities and are using excess cash to pay down debt, the report said.

As a result of all the new money flooding into the Ethereum ecosystem from crypto investors, the value of Ethereum began to soar. Over a 12-month period starting from the date of the Bitcoin halving in May 2020, Ethereum soared by more than 1,732%.

The altcoin ecosystem reciprocates the price movements in Bitcoin. However, some tokens will outperform others during the bull market. Investors monitor short-term volatility in altcoins around the time of Bitcoin halving, intending to add altcoins into their portfolio.

When its supply is reduced through halving, and if the demand stays constant or increases, we often see a ripple effect on the prices of other cryptocurrencies.

How Long Does It Take to Mine 1 Bitcoin? The reward for mining is 3.125 bitcoins. It takes the network about 10 minutes to mine one block, so it takes about 10 minutes to mine 3.125 bitcoins.

Ben Gagnon, chief mining officer at Bitfarms, said that the company's low-cost power contracts and energy efficiency strategies will ensure profitability even after the halving.

Following the halving, the bitcoin price stabilized; however, fees on the network spiked in relation to the launch of a new protocol for issuing tokens.

After the halving on April 20, average mining costs will rise above $80,000, and for miners to continue operating profitably, the BTC price must trade higher than that price.

Bitcoin halvings are programmed to occur automatically every 210,000 blocks — roughly every four years. Once a halving event occurs, miners receive 50% fewer bitcoins as a subsidy reward for every block of transactions they mine and add to the blockchain.