Bitcoin halving is approaching, only the most efficient miners will survive.

The bitcoin mining hashrate, which measures computing power on the network, is expected to decrease significantly in a year when rewards are halved. Every four years, the reward for successfully mining a bitcoin block is cut in half, which is known as the halving. This event reduces inflationary pressure on bitcoin. Currently, rewards are 6.25 BTC per block ($170,000), but in April 2024, they will be reduced to 3.125 BTC per block ($85,000). Publicly listed miners currently mine at a cost of $10,000-$15,000 per bitcoin, but after the halving happens, these costs will double, bringing miners’ breakeven point to $20,000-$30,000. Wall Street giant JPMorgan predicted that the cost to mine bitcoin could rise as high as $40,000 after the halving.

With such a high cost of mining and absent any significant rally in the price of bitcoin, only the most cost-efficient miners will survive, while others will be forced to shut down their operations. Operators with higher production costs per bitcoin will have a more difficult time surviving the halving. Efficiency of operations and machines has become a focus for the industry, as opposed to simply bringing as much hashrate online as possible, which was the case during the bull market of 2021.

Investments in new machines have been “measured” given the uncertainty over the economics of mining for the upcoming year. The lack of investment might seem counterintuitive considering that hashrate and difficulty, key measures for the miners’ profitability, have been setting new all-time highs throughout 2023. However, the rising hashrate can reflect economic conditions of several months ago. Discussions for new developments have seen an uptick in 2023, but relative to the autumn of 2022, when bitcoin prices were in their lows of around $15,000, the situation has improved for the industry.

A rally in the price of bitcoin or a major slump in energy prices could boost miners’ profitability, such that they don’t have to power off after the halving. Bloomberg Intelligence and Matrixport said that the halving has the potential to supercharge the price of bitcoin by as much as 81%.

Edited by Nelson Wang.

(There is no need for translation as the text is already in English.)

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