- Bitcoin (BTC) halving is one of the most anticipated events in the crypto space, and this event has the potential to propel the asset’s price to new highs.
- While the halving event can bring good fortune for Bitcoin and the overall cryptocurrency market in terms of price, it could also be a “death knell” for some miners, according to experts.
- After the local mining ban in China in 2021, miners migrating from China to North America have seen an increase in their debt.
There are months left until the halving event, eagerly awaited by the Bitcoin community, which could potentially drive some miners into bankruptcy.
Expert Opinions on Bitcoin Halving
Bitcoin (BTC) halving is one of the most anticipated events in the crypto space, and this event has the potential to propel the asset’s price to new highs. It is known that previous halvings partially contributed to Bitcoin’s rally to record valuations, and the upcoming halving event carries similar expectations.
While the halving event can bring good fortune for Bitcoin and the overall cryptocurrency market in terms of price, it could also be a “death knell” for some miners. Concerns have arisen particularly about the mining economy leading up to the next halving. In this regard, Jaran Mellerud, a crypto mining analyst, predicts that the high costs of the process will impact most miners. Mellerud stated the following:
“Almost half of miners will be in trouble because they have less efficient mining operations with higher costs.”
For instance, it is projected that the electricity price required to ensure profitability for the primary mining machine after the halving will decrease from 12 cents/kWh to 6 cents/kWh. Mellerud noted that approximately 40% of miners have operating costs exceeding this threshold value, and small miners who have costs above 8 cents/kWh and lease their equipment from external sources will face challenges in sustaining profitability.
Wolfie Zhao, Head of Research at TheMinerMag research unit:
“When you account for everything, the total cost for some miners is much higher than the current price of Bitcoin. Many miners with less efficient operations will have negative net profit.”
Miners Increasing Debts
These concerns coincide with a period when the Bitcoin mining sector is operating under debt due to last year’s prolonged bear market and increased electricity costs. According to Ethan Vera, COO of Luxor Technologies, the global mining sector currently holds debts between $4.5 billion and $6 billion, representing a decrease from $8 billion in 2022. This debt includes loans secured by mining equipment and Bitcoin collateralized loans.
Notably, miners’ debts have increased following the migration of miners from China to North America after the local mining ban in 2021. Limited access to capital markets for miners led to easier debt financing in the United States, according to Wolfie Zhao.
Competition among Bitcoin miners has also increased, and profit margins have decreased. Bitcoin miners are also taking proactive measures to protect themselves by awaiting the halving.
Although Miners Prepare, They Could Eventually Be Bankrupt
While miners implement strategies such as fixing energy prices, strengthening financial reserves, and reducing investment activities, Tiffany Wang, CEO of Texas-based Bitcoin miner Lotta Yotta, believes that some operators will still go bankrupt despite preparations. Yotta stated:
“There is high risk in the halving year. It’s better to have some funds saved up to keep the company running. Everyone should be prepared. Unfortunately, many miners will eventually drop out of the market.”
Amidst these concerns, mining difficulty reached a record high in June, and Bitcoin’s price will need to reach $50,000 to $60,000 next year to sustain profit margins after the halving.
