A recent research report by analytics firm Glassnode has highlighted the growing concerns for Bitcoin miners in the wake of the cryptocurrency’s next block subsidy halving. With Bitcoin miner competition at record highs and the hash rate reaching unprecedented levels, miners are facing significant challenges to maintain profitability in the current BTC price environment.
Glassnode points out that while ordinal inscriptions are helping miners by turning empty blockspace into a source of revenue, the proportion of income received from fees remains modest compared to historical standards. Additionally, the amount of hash rate competing for rewards has increased by 50% since February, as more miners and newer ASIC rigs come online. This surge in hash rate creates a foundation for an upcoming showdown when miner rewards per block decrease by 50% in April 2024, effectively doubling the “production cost” per BTC.
Glassnode presents two models for estimating the price at which miners, on aggregate, will face severe income stress. The first model compares issuance to mining difficulty and suggests that the most efficient miners on the network have an acquisition price of around $15.1k. However, the post-halving doubling of this level to $30.2k would likely put the majority of the mining market under significant financial strain. Another model puts the average miner acquisition price at $24,300 per Bitcoin, slightly below the spot price as of September 28.
Despite these concerns, some analysts are more optimistic about how miners will handle the build-up to the halving. Analyst Filbfilb, co-founder of trading suite DecenTrader, believes that miners will increase their accumulation of BTC before the event. He suggests that miners are incentivized to ensure that prices are well above marginal cost prior to the halving, as their revenue will be effectively halved after the event. This smart money buying the rumor could contribute to positive supply dynamics for Bitcoin.
It is important to note that this news article does not provide investment advice or recommendations. It emphasizes the challenges faced by Bitcoin miners and the potential implications of the upcoming block subsidy halving. As with any investment, readers should conduct their own research and exercise caution.
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