TLDR:

  • Bitcoin halving in 2024 will cut mining rewards in half

  • Miners will face profitability challenges as operating costs will surpass income

  • Bitcoin price should rise to $50,000-60,000 to avoid losses for miners

  • Miners are taking steps to reduce costs and secure income ahead of halving

Bitcoin is set to undergo its fourth halving in April 2024, a process that will reduce the rewards for mining new blocks by half. The halving, which occurs every four years, is expected to boost the price of Bitcoin as it lowers the supply of new coins and increases the scarcity of BTC.

However, the halving also poses significant challenges for BTC miners, who will see their income drop while their costs remain high. The current reward for mining a block is 6.25 Bitcoin, or about $188,876 at today’s prices. After the halving, this will fall to 3.125 Bitcoin, or $94,438.

Kevin Zhang, senior vice president of mining strategy at crypto mining firm Foundry, said that the price of Bitcoin should rise to $50,000-60,000 next year to prevent losses for miners. In the previous three halvings in 2012, 2016, and 2020, the price of Bitcoin had increased by about 8,450%, 290% and 560% in the following year, respectively.

But before the next halving, the mining industry faces more difficulties than before, as mining difficulty reaches a record level and power costs increase. According to data from btc.com, mining difficulty hit an all-time high in June. This means that miners have to spend more on hardware and electricity to compete with the network.

Jaran Mellerud, a cryptocurrency mining analyst at Hashrate Index, said that about 40% of miners have operating costs per kilowatt-hour above the breakeven point of six cents/kWh after halving. He noted that miners with less efficient and smaller operations will struggle to survive. “For many miners with less efficient operations, net profits will turn negative,” he said.

To prepare for the halving, miners are taking various measures to cut their costs and secure their income. Some fix electricity prices with their suppliers, while others increase their cash reserves and reduce capital expenditures. JPMorgan Chase & Co. strategists wrote in a June 1 note that the halving would double Bitcoin’s cost of production to around $40,000, which could act as a support level for its price in the future.