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Bitcoin miners to face ‘stress test’ in next halving: JP Morgan

Based on analysts at world monetary big JP Morgan, bitcoin miners will face headwinds because the hash price hits new file highs forward of the halving occasion subsequent spring, fueled by risky electrical energy prices and competitors amongst miners to supply. The fee will go up.

Hash price refers back to the computational energy used to mine a cryptocurrency. The halving occasion, which happens roughly each 4 years, will halve the rewards for miners.

“The upcoming bitcoin halving occasion in April/Might 2024 could possibly be a stress take a look at for bitcoin miners,” wrote JPMorgan analyst Nikolaos Panigartzoglu and his colleagues within the agency’s newest circulate and liquidity report, shared by the agency. decrypt,

“(This) will scale back the issuance rewards from 6.25 to three.125 BTC, which can scale back the income for miners, whereas additionally successfully rising the price of manufacturing of bitcoins,” the report defined. “Because of this, whereas the bitcoin halving has a optimistic impact on the value of bitcoin, it poses a problem for bitcoin miners as manufacturing prices traditionally act as a flooring.”

Based on the evaluation, and based mostly on the worldwide common price of electrical energy of $0.05/kWh, it prices about $20,000 to mine one bitcoin, which is presently price about $30,000 per CoinGecko. However JP Morgan mentioned hash price volatility factors to using quite a lot of power sources, that means miners with entry to low-cost electrical energy are .

Actually, the corporate mentioned, a one % improve in the fee per kilowatt hour will increase the price of bitcoin manufacturing by $4,300.

“After the halving, this sensitivity will double to $8,600, including danger to larger price producers,” the agency mentioned.

Nonetheless, there was some excellent news for miners.

It added, “Institutional curiosity in bitcoin mining has aided struggling miners, with corporations corresponding to Galaxy Digital and Grayscale Investments investing in mining rigs.” Galaxy Digital not too long ago acquired Argo Blockchain, and Grayscale has spun off a unit targeted on bitcoin mining {hardware}.

Based on the report, “Tether, the world’s largest stablecoin issuer, can also be planning to put money into a bitcoin mining website in El Salvador.”

Nonetheless, a major improve in bitcoin value and transaction charges could be required to offset the decrease block reward.

JP Morgan additionally noticed that “the decline in publicity surrounding the cryptocurrency poses a further problem to miners’ income,” together with “the decline in publicity round ordinals.”

The variety of each day ordinals inscriptions not too long ago reached an all-time excessive, however bitcoin charges couldn’t maintain the sooner highs with them.

“Going ahead, it appears unlikely that the bitcoin hash price will proceed to develop on the identical tempo after the April/Might 2024 occasion, with out a continued improve within the value of bitcoin above its manufacturing price or a big improve in transaction charges, which Might offset the discount in issuance awards,” JPMorgan concluded.

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