According to the data, at 8:09 on April 20, 2024, Beijing time, Bitcoin successfully completed its fourth halving at a block height of 840,000. The Bitcoin network's mining rewards were halved from 6.25 BTC to 3.125 BTC. The last halving occurred on May 11, 2020.
After the Bitcoin halving was completed, the Bitcoin price rose slightly and is now reported at $6,3914 per coin.
Bitcoin market supply will be drastically reduced starting in late April. Based on the price of Bitcoin before it was halved (about 64,000 US dollars/piece), the entire mining industry may lose more than 10 billion US dollars in the next year.
A decline in earnings? Miners are busy depositing coins
What is Bitcoin halving? According to our understanding, Bitcoin halving is an event that occurs approximately every four years to halve the rewards for “mining” Bitcoin transactions. By reducing the rate of production of new bitcoins, halving introduced deflationary properties to Bitcoin's economic model. The halving event is a key feature of Bitcoin's design to ensure its scarcity, value retention, and long-term sustainability as a digital currency. According to the design of the Bitcoin protocol, the halving event occurs approximately every 210,000 blocks after being mined. This time interval is about four years, so the time for the next Bitcoin halving will depend on the accumulation of block heights rather than a fixed point in time.
According to information, the daily production of bitcoins varied before being halved, but they all revolved around the block reward system, which produced an average of 6.25 bitcoins every 10 minutes. According to previous block rewards, this is equivalent to producing approximately 900 bitcoins per day. However, after the halving event, this figure would turn into an output of about 450 units per day.
If Bitcoin does not continue the growth momentum of the past year and instead fluctuates in price before halving ($60,000 to $65,000 each), the entire mining industry will lose more than $10 billion in revenue over the next year.
However, with regard to possible losses after halving, miners were not in a hurry to sell their bitcoins before the halving. They hoped that the value of bitcoins would rise after the halving, so as to sell more bitcoins at high prices to offset the losses caused by the decline in production.
According to cryptocurrency research institute The Miner Mag, just a few days before mining rewards were halved, several mainstream Bitcoin miners in the world, including listed miners such as Marathon Digital Holdings (Marathon Digital Holdings), CleanSpark (CleanSpark), and Bitfarms, had already hoarded about 2.8 billion US dollars worth of bitcoins. As of the end of March, Clean Spark held more than 5,000 bitcoins, an increase of 2,400% over the same period last year. Marathon Digital Holdings increased its holdings by 50% to 17,300 bitcoins, while Bitfarms also increased its holdings by 50%.
Matthew Schultz, Executive Chairman of Clean Sparks, said: “We want Bitcoin to appreciate, which will solve the problem of halving rewards.”
In response to the sharp rise in currency prices expected by miners, LMAX Group market strategist Joel Kruger said in a statement: “Everything known has been converted into price.” “Having said that, anyone who wanted to buy Bitcoin due to the halving event has already done so, which suggests that in the short term after the halving, we may see a sell-off reaction.”
Officially halved, miners accelerated internal volume
According to the tracking of the Bitcoin production data statistics website Coinwarz, at 8:09 on April 20, 2024, Beijing time, Bitcoin successfully completed its fourth halving at a block height of 840,000. The Bitcoin network's mining rewards were halved from 6.25 BTC to 3.125 BTC. The last halving occurred on May 11, 2020.
According to information, since there is an upper limit on bitcoins produced within a certain period of time, in other words, the more computing power a miner has, the greater the share of rewards received. Marathon Digital Holdings, Clean Spark, and other miners compete for fixed Bitcoin rewards by using ultra-fast computers to solve math puzzles. They have invested in new equipment and sought to acquire smaller competitors this year in an attempt to mitigate the impact of falling revenue.
Marathon Digital Holdings of the United States announced the acquisition of two Bitcoin mining farms with a total operating capacity of 390 megawatts on January 16, 2024. Although ownership of these two sites has been taken, another Canadian miner, Hut8 Mining, continues to act as the operator. On January 30, 2024, the subsidiary of Marathon Digital Holdings signed an agreement with Hut8Mining to terminate Hut8 Mining as the operator of these sites and hand over operating responsibilities to Marathon Digital Holdings. Fred Thiel (Fred Thiel), Chairman and CEO of Marathon Digital Holdings, said: “By personally operating the Granbury and Kearney plants, we will be able to fully appreciate the operational and economic benefits of owning these assets.” “The steady performance of our Abu Dhabi site clearly shows that we have some of the best operators in the industry. We look forward to our new plants in Texas and Nebraska gaining more impact and using our operational expertise to realize the full benefits of our recent acquisition.”
On April 2, 2024, Marathon Digital Holdings also announced the acquisition of a 200-megawatt Bitcoin mining data center adjacent to the Wind Farm (Wind Farm) on its official website. Fred Thiel said, “With the completion of this acquisition, our operation will have a greater impact. There is an opportunity to reduce the production cost of this site and increase the production capacity by an additional 100 megawatts.” Recently, however, market investors are not optimistic about whether the price of Bitcoin can continue to rise to make up for the loss of falling mining output. J.P. Morgan Chase gave Marathon Digital Holdings a “reduced holdings” rating in a report on April 10. According to data, Marathon Digital Holdings's stock price has fallen by more than 28% since the beginning of the year.
Clean Sparks announced the acquisition of three Bitcoin mining data centers in Mississippi on February 27, 2024. “We are excited to begin operations in Mississippi with our latest expansion. We are working hard to add more computing power as soon as possible.” CEO Zach Bradford (Zach Bradford) said. “Expanding to new states is a significant milestone for our company, and we look forward to partnering with the community we are joining. By maximizing Bitcoin miners' grid service capabilities, we aim to create jobs and promote economic growth, thereby benefiting both of us.” The reporter found out that the reality is that Clean Spark's stock price has also dropped by more than 15% in the past month.
The impact of Bitcoin halving on the expected earnings of miners has also recently affected the stock price performance of many miners. The shares of the two miners, RiotPlatforms and Hive Digital Technologies, fell 26.37% and 15.58%, respectively, in the past month. Meanwhile, Hut8 Mining's stock price has fallen 36.11% since the beginning of the year.
Coin Shares digital asset analyst Matthew Kimmel said, “This is a last-ditch effort for miners to extract as much revenue as possible before production is hit hard.” “As revenue declines across the board overnight, each miner's strategic response and how they adapt will likely determine who is leading and who is falling behind.”
Electricity costs soar, tech giants take the lead
Looking back, Bitcoin's value reached a new high after every previous halving, helping to mitigate the cyclical decline in mining rewards and the increase in operating costs. However, the industry's room for success is getting smaller, and miners need to continuously spend more money to compete in never-ending technology competitions to get smaller returns, while miners now face power competition from the emerging and well-resourced artificial intelligence industry.
According to The Miner Mag, although miners listed in the US are representative of the industry, they only account for about 20% of the industry's computing power, and the remaining private miners may be more vulnerable after being halved, because compared to listed companies that can raise capital through stock sales, private miners can usually only use debt financing or venture capital to meet their needs. However, in the next few months, market traders are generally betting that stocks in the mining industry will fall in response to potential moves by listed miners that may sell stocks to revolve around cash flow. As of April 11, the total short equity in 15 crypto mining stocks was close to $2 billion, according to estimates from financial analysis and technology firm S3 Partners LLC.
According to information, the current cryptocurrency market is very different from a few years ago. In the past, most mining activities were scattered all over the world, but in recent years, most mining activities have moved to the US, which has intensified electricity competition in the US.
Adam Sullivan (Adam Sullivan), CEO of Core Scientific Bitcoin listed company headquartered in Austin, Texas, said, “America's energy is extremely limited.” “Currently, miners are competing with some of the largest technology companies in the world. These tech companies are struggling to find space for data centers, which also have high energy consumption properties.”
The emerging artificial intelligence industry is attracting large amounts of capital, making it harder for miners to get preferential electricity prices from utility companies. Amazon announced it would spend nearly $150 billion on data centers, while Blackstone is building a $25 billion data center empire. Google and Microsoft are also investing heavily.
David Foley (David Foley), co-managing partner of the Bitcoin Opportunity Fund (Bitcoin Opportunity Fund), previously stated, “The AI industry is willing to pay three to four times the electricity bill Bitcoin miners paid last year, and this is happening around the world.” According to information, the fund has invested in both public and private miners.
Given the stable revenue streams of big tech companies, tech giants also have an advantage in getting electricity from utility companies, while cryptocurrency mining revenue fluctuates as the price of Bitcoin rises and falls. Taras Kulyk (Taras Kulyk), CEO of cryptocurrency mining service provider Sunny Digital, said: “Given the strong earnings from tech companies, utilities see tech companies as more reliable buyers.”
Due to competition, low-cost electricity contracts may be more difficult to renew when existing agreements expire. Greg Beard (Greg Beard), CEO of listed Bitcoin miner Stronghold Digital Mining, said that large Bitcoin miners tend to lock in energy prices, usually for a few years.
Editor/Jeffrey