Key Takeaways:
The crypto community is gearing up for the Bitcoin halving event scheduled for this later week that will create a supply shock for the world’s largest cryptocurrency by market capitalization and propel its price to new heights.
However, the event poses a significant challenge for Bitcoin miners who would suffer a multi-billion decline in their revenue.
Miners Set to Lose $10 Billion in Annual Revenue After Bitcoin Halving
The halving, expected to take place around April 20th, will reduce the daily supply of Bitcoin by half from 900 to 450 BTC. Considering Bitcoin’s current price, this cut in the leading cryptocurrency’s supply could result in miners incurring a revenue loss of approximately $10 billion annually.
To offset the expected revenue decline, leading mining firms like Marathon Digital and CleanSpark are investing in new mining equipment and acquiring smaller competitors.
Speaking on the issue, CoinShares analyst Matthew Kimmell said this will be the final push for miners to “squeeze out” maximum revenue before Bitcoin production takes a big hit. He noted that with revenues decreasing overnight across the board, what could determine the survival of miners is their strategic response to the event and how well they can adapt to the market dynamics.
Historically, Bitcoin has set record-high prices following the halving, and this has helped offset the drop in mining rewards and the surge in operational costs. Despite the loss in rewards, miners continuously increase their expenditure to keep up with the growing demand for Bitcoin.
The rising value of Bitcoin has mitigated the high energy expenses of running mining rigs while propelling the expansion of these operations.
Bitcoin Mining Industry Has Surged $20 Billion in Market Cap Since 2013, Says JPMorgan
As per a JPMorgan report from April 1, the introduction of specialized Bitcoin mining equipment has led to the combined market cap of US-listed mining firms to surge by approximately $20 billion.
Despite being prominently featured in the industry, publicly-listed miners only represent 20% of Bitcoin’s total computing power, otherwise known as hashrate. The remaining contribution to the network is made by private miners, who are faced with greater vulnerability post-halving.
While public miners have the option to raise capital through share offerings, private miners are dependent on debt financing or venture capital funding to meet their operational obligations.
Miners Expected to Liquidate $5 Billion Worth of BTC in the Next Six Months
In a note to investors on April 13th, Markus Thielen, the head of research at 10x Research, said miners could potentially liquidate $5 billion worth of BTC following the block reward halving event this week.
As per his calculations, the overhang from this massive selling spree could last up to six months, which could explain why the price of Bitcoin might move sideways for the next few months. Thielen’s findings are based on the patterns of previous halvings.
He also warned about the wider crypto market facing a significant challenge in a six-month ‘summer lull’.
In the five months that followed the last halving in April 2020, the price of Bitcoin remained range-bound between $9,000 and $11,500. Considering the scenario, this year, the market may not witness any upward trajectory until around October.
There is also the case of miners tending to stock Bitcoin leading up to the event, which could result in a supply/demand imbalance and a subsequent rally in BTC prices. This has already occurred as the price of the apex cryptocurrency surged by 74% in 2024 to reach an all-time high of $73,734 last month.
Thielen suggests that Marathon, the world’s largest Bitcoin miner, has an inventory of BTC that will likely be sold after the halving, to prevent a “revenue cliff” from occurring.
The company produces 28-30 Bitcoins per day and this could result in 133 days of additional supply plus what they produce on a daily hitting the market. That means, between 14 and 15 BTC per day will be supplied to the market by Marathon after the halving.
The analyst believes that other miners could follow a similar pattern to gradually liquidate part of their inventory.
Just last week, Marathon Digital’s CEO Peter Theil said that the company’s break-even rate to remain profitable post-halving would be about $46,000 per BTC mined. This is considering that a significant price movement in the six months following the event is unlikely.
Thielen concluded his research by stating that if all miners adopted the strategy of selling their inventory post-halving, then it could result in a maximum of $104 million worth of Bitcoin being sold every day. Such a scenario would reverse the supply/demand imbalance that caused BTC to rally in the lead-up to the halving.
At the time of writing, Bitcoin (BTC) is trading at $66,478 – up 2.5% in the last 24 hours.
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