Bitcoin Miners Face ‘Stress Test’ in Next Halving: JP Morgan

Bitcoin miners will face headwinds because the hash rate reaches new record highs forward of the upcoming halving occasion subsequent spring, with unstable electrical energy prices and competitors amongst miners pushing up the price of manufacturing, in accordance with analysts at world monetary big JP Morgan.

Hash charge refers back to the computational energy used to mine a cryptocurrency. The halving event, which happens roughly each 4 years, will cut back miners’ rewards by half.

“The upcoming bitcoin halving occasion in April/Might 2024 could possibly be a stress take a look at for Bitcoin miners,” writes JP Morgan analyst Nikolaos Panigirtzoglou and colleagues within the agency’s newest Flows and Liquidity report, which the agency shared with Decrypt.

“[It] would cut back the issuance rewards from 6.25 to three.125 BTC, implying a discount in miners’ income, successfully growing Bitcoin’s manufacturing price on the identical time,” the report explains. “Consequently, whereas Bitcoin halving is seen as having a constructive impact on the bitcoin value given the manufacturing price acted traditionally as a ground, it poses a problem for bitcoin miners.”

Based on the evaluation, and primarily based on a worldwide common price of electrical energy of $0.05/kWh, it prices round $20,000 to mine a Bitcoin, which is at the moment value round $30,000, per CoinGecko. However JP Morgan stated the volatility of the hash charge factors to using a wide range of power sources, which means miners with entry to lower-priced energy have a bonus.

Actually, the corporate stated, a one-cent enhance in the price per kilowatt hour interprets to a $4,300 enhance in the price of Bitcoin manufacturing.

“Publish halving this sensitivity would double to $8,600, thus growing the vulnerability of higher-cost producers,” the agency famous.

There was some excellent news for miners, nonetheless.

“Institutional curiosity in bitcoin mining has offered help to struggling miners, with investments in mining rigs from corporations like Galaxy Digital and Grayscale Investments,” it noticed. Galaxy Digital just lately acquired Argo Blockchain, and Grayscale spun off an entity centered on Bitcoin mining {hardware}.

“Tether, the world largest stablecoin issuer, additionally plans an funding in a bitcoin mining website in El Salvador,” in accordance with the report.

Nonetheless, the worth of Bitcoin and transaction charges might want to rise considerably to offset the decrease block reward.

JP Morgan additionally noticed that “the decline in hype surrounding cryptocurrencies poses an extra problem for miners’ revenues,” together with “the decline within the hype round Ordinals.”

The variety of every day Ordinals inscriptions just lately hit an all-time high, however Bitcoin charges didn’t maintain earlier highs together with them.

“Going ahead, it appears unlikely that the Bitcoin hash charge will proceed to rise on the identical tempo put up the April/Might 2024 halving occasion with none sustained rise within the Bitcoin value above its manufacturing price or a big enhance in transaction charges that would offset the discount in issuance rewards,” JP Morgan concluded.