The cryptocurrency event known as “halving” is scheduled to occur in the upcoming months, which will lower the payout for Bitcoin miners who successfully finish a block. The upcoming event in mid-April 2024 has traditionally had a positive impact on Bitcoin’s (BTC) price. Grayscale researchers, however, issued a warning that price increases following a halving might be impacted by a number of variables other than a straightforward stock and flow study.
A lot of great questions on if #miners are going to rally now or post halving.
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IMO the answer is both.
The halving is not what drives miner price, the price of #Bitcoin is primarily what drives miner price. If anything the halving will obviously be bad for miners from a…
— Freedom By 40 (@Freedom_By_40) February 10, 2024
Challenges for Miners in the Post-Halving Era
A paper by Grayscale analysts describes how activity on the largest blockchain in the world will be impacted by the impending halving of the Bitcoin block reward. In mid-April 2024, almost two months from now, Bitcoin (BTC) will see a significant transformation that will reduce its payout to miners who successfully finish a block.
As the halving approaches, miners face reduced block rewards and a growing mining difficulty, both of which put them in a challenging position. In order to prepare, miners have been disposing of their cryptocurrency holdings and securing funds through different methods like equity investments and collaborations. For instance, Marathon Digital plans to raise $750 million in the last quarter of 2023. However, Grayscale analysts suggest that Ordinals fees could offer a potential alternative revenue source for miners.
The Rise of Ordinals: Miners’ New Source of Revenue?
Ordinals is an innovative feature on the Bitcoin network that allows users to mint non-fungible tokens (NFTs) directly on the blockchain. Since its launch, Ordinals has gained significant traction and is driving massive demand for block space.
Miners have been benefiting from this trend by earning revenue through inscription transaction fees. Mining Ordinal transactions have brought in over $200 million for miners, accounting for roughly 20% of their accumulated profits.
Miners want more revenue, and Ordinals have brought about a renaissance on Bitcoin with massive demand for block space.
Bob Bodily, Co-Founder & CEO of Toniq Labs
Preparing for the Post-Halving Era
After the next halving event, which is set for April 2024, JPMorgan has forecast that the Bitcoin Network Hashrate may decline by 20%. In a study from the previous year, the bank stated that when less-efficient hardware is retired, “we estimate as much as 80 EH/s (or 20% of the network hashrate) could be removed at the next halving (April ’24).” According to the report, the four-year block reward potential is worth almost $20 billion at the current value of Bitcoin.
While it remains uncertain how the post-halving era will unfold, miners are actively exploring alternative revenue streams and seeking ways to optimize their operations. Some individuals are exploring the possibility of using risk management instruments like those provided by GSR in the financial sector’s trading and market-making arena.
Others are looking to expand their operations to countries with lower energy costs, like Ethiopia. Regardless of the approach, miners will need to be agile and adaptable to navigate the changing landscape of Bitcoin mining.
The Future of Bitcoin Mining
While lower energy costs and innovative features like Ordinals offer advantages for Bitcoin miners, government policies remain a significant concern. Countries with hostile stances towards cryptocurrency mining may drive miners away, as seen in the case of China. However, Ethiopia’s friendly approach to mining has attracted numerous companies, and other countries are exploring similar opportunities.
The upcoming Bitcoin halving event presents both challenges and opportunities for miners, making it an exciting time to be part of this dynamic industry. Despite the challenges ahead, the future of Bitcoin mining looks bright as the network continues to evolve and new opportunities arise. Whether it’s through Ordinals fees or other revenue streams, miners will find ways to thrive in this dynamic industry.
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