How Bitcoin miners can survive a hostile market — and the 2024 halving


Only seven months stay earlier than the subsequent Bitcoin (BTC) halving in April 2024. It occurs roughly each 4 years and is a deflationary course of that cuts the manufacturing of latest cash by 50%.

Bitcoin’s halving is a high-profile event for crypto traders and has traditionally led to an increase in BTC’s price. However, its impact on the mining industry is a more complex issue. It reduces block rewards, one of the primary revenue streams for miners. The 2024 halving will reduce it from 6.25 BTC to 3.125 BTC. That’s why miners must adapt their strategies to compensate for the reduced rewards resulting from the halving.

Let’s explore the strategies and alternative income sources that may help Bitcoin miners amid hostile market conditions.

Changing mindsets

Bitcoin mining involves a competitive process where miners vie for block rewards. This competition is driven by Bitcoin’s block time, which averages around 10 minutes per block on the protocol level. Whether the network’s computing power is relatively low at 1 kilo hash per second or surges to a massive 200 million terra hashes per second, the same block rewards must be distributed among miners.

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This aggressive atmosphere encourages miners to prioritize power effectivity and the use of cost-effective {hardware}. With every halving occasion, the place block rewards are minimize by 50%, this pattern towards effectivity positive aspects momentum. As the value of manufacturing a single BTC is about to roughly double shortly after the subsequent halving, miners might want to discover methods to optimize their profitability and concentrate on these three important components.

Bitcoin miners’ survival rests on these three whales

The first and most essential “whale” is the value of electrical energy. Even a modest fluctuation of 1 cent per kilowatt-hour (kWh) can lead to a substantial $3,800 variance in the manufacturing value of BTC, in line with JPMorgan. To bolster their post-halving profitability, miners are exploring refined contracts and considering relocation to international locations or areas the place electrical energy costs are decrease. They even contemplate energy technology from stranded fuel choices. I consider that it’s essential for miners to safe electrical energy charges at or beneath 5 cents/kWh to keep up profitability past April 2024.

The second main issue demanding miners’ consideration is the effectivity of their gear. For occasion, each day BTC mining prices can be slashed by greater than 63% when upgrading from a rig with a 60 joules per terahash (J/TH) effectivity ranking to at least one with a 22 J/TH ranking. Miners boasting {hardware} effectivity and benefiting from decrease electrical energy prices shall be the most worthwhile. They are the ones almost definitely to climate important market occasions like the upcoming halving.

Additionally, I counsel miners make use of the third technique that includes accumulating extra capital in mined BTC throughout worthwhile durations. This reserve can function a buffer in opposition to the impression of diminished block rewards post-halving. When the post-halving rally happens, miners can capitalize on their reserves by promoting mined property at a larger revenue margin, serving to to offset the losses.

While methods resembling securing decrease electrical energy charges, adopting extra energy-efficient mining gear, and using reserve capital can mitigate the adversarial results, the 2024 halving will deliver substantial stress on miners. It can result in the potential closure of quite a few mining operations. Thus, miners may also have to discover various income streams. One promising alternative for miners lies in initiatives like Bitcoin Ordinals.

Other methods

Bitcoin Ordinals have not too long ago garnered important consideration by driving transaction fees inside the Bitcoin community to new highs. Ordinal “inscriptions,” the metadata connected to every satoshi, are distinctive property created straight on the Bitcoin blockchain, just like a nonfungible token (NFT). To acquire one, customers usually have interaction with the platform or protocol answerable for Ordinals.

Related: 10 years later, still no Bitcoin ETF — but who cares?

As the variety of inscriptions rises — surpassing 25.5 million as of August — so does the income generated from transactions, which presently stands above $53 million. This pattern means that various revenue streams for miners could achieve prominence in the long run.

Ordinals shift the profitability equation for miners, growing consumer demand for creating inscriptions, initiating processing transactions on the Bitcoin community and incentivizing miners to incorporate their transactions in the subsequent block.

We can definitely anticipate extra developments on prime of the Bitcoin community that may allow miners to adapt extra successfully to the post-halving panorama. As we transfer nearer to the halving occasion, miners should prioritize the aforementioned methods to optimize their profitability and keep open to new options on the horizon.

Didar Bekbauov is the CEO of Bitcoin mining firm Xive, which he co-founded in 2019. He beforehand served as a managing accomplice at Hive Mining. He holds an undergraduate diploma from Kzak-British Technical University and a grasp’s diploma in monetary administration from the United Kingdom’s Robert Gordon University. He additionally acts as a mentor at the Founder Institute startup accelerator program in Houston, Texas.

This article is for basic data functions and just isn’t meant to be and shouldn’t be taken as authorized or funding recommendation. The views, ideas and opinions expressed listed here are the writer’s alone and don’t essentially replicate or characterize the views and opinions of Cointelegraph.

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