Bitcoin Halving: What Happened and What It Means for Miners?

As a miner, you have already noticed that your profits from yesterday’s mining have been cut in half. Your hashing power and network will remain the same, but the reward per block mined will be 50% reduction from 12.5 to 6.25.

What happened yesterday? May 11, block 630,000 Mined, the reward per block is planned to be halved. Bitcoin has experienced three halvings in its 11 years of existence. The first occurred in November 2012 when the reward was reduced from 50 to 25, and the second occurred in July 2016 when the reward was reduced to 12.5.

Halving occurs every 210,000 blocks mined, and its purpose is to create deflation. This means reducing the creation of new tokens to keep the cryptocurrency economy healthier.

On paper, this will lead to higher Bitcoin prices in the long term. But what about the short term?

There are many factors that affect mining profitability, the most important being network difficulty, mining equipment, Bitcoin price, and electricity price. Let’s look at each individually.

As Cointelegraph noted, many miners decided to hold on to their newly mined Bitcoin just before and during the halving in order to get a better deal after it. It’s all about offer and demand, and if the rate of Bitcoin creation slows, the price will skyrocket. In other words, no one can say for sure when the market will strengthen.

The most conservative analysts expect the market to remain the same until early next year, and you can see why. Despite the significant decrease in Bitcoin production per block, there are currently 18,321,212.5 BTC in circulation, while the entire mining network produces 900 BTC per day. This corresponds to approximately 0.005% of the total mass per day.

In 2016, things were different, especially in 2012, when the amount of existing BTC was several times less, and the amount of Bitcoin created per day was several times more.

The more people (or miners and similar) who mine a coin, the less everyone gets. Some experts say a significant portion of miners will soon flock to Bitcoin. Bitcoin.com expects the hash rate to drop by more than 30% as people turn off their miners.

Coin mining is not free. Mining equipment consumes significant amounts of electricity, so when it comes to profitability, power consumption is an important variable to consider along with the cost of the hardware itself.

Larger farms often have cheaper electricity contracts. Some are located in countries and regions where electricity is low or free. Those who don’t have that luxury (mostly home miners) can see their mining income turn into losses.

Now, today’s network hashrate is higher than ever, and if there is a wave of people leaving the network, it still has to come. Obviously, a 30% reduction in difficulty would make mining more profitable, which could bring back some miners and increase the network hash rate again.

Another factor to consider is that with large mining farms providing cheap or free electricity, individuals and small farms may begin to purchase mining machines. Even if the number of people mining a coin decreases by 30%, the number of miners may remain roughly the same.

I don’t think the network hash rate will drop much as of today.

Another factor to consider is that electricity prices may fall significantly in certain parts of the world. Record-low oil prices, rainy seasons in certain industrial regions of China, and lockdown policies all contribute to rising electricity rates in certain regions.

This probably means that the largest farms will still be active and profitable even after being cut in half.

Currently, Bitcoin can only be mined using ASICs. It is known to be a costly, power-consuming, and high-risk investment due to the volatility and aging rate of the cryptocurrency market. New ASIC models are released every year, and all new models feature higher hashrate and lower power consumption.

Despite the halving, ASIC competition continues. Bitmain We announce the release of . S19 Pro (110TH/s power efficiency at 29.5J/TH)and MicroBT Preparing for release MS30S++ (112TH/sec, 31J/TH). The price per unit is $2,000 to $3,000, which is similar to the price at the time of the previous ASIC release.

All of this means that both individuals and mining farms that are unable to keep up with the latest equipment will face a much more significant loss of profits once that new generation of equipment is released.

Will this halving kill Bitcoin? surely. While some people will rush to the market to sell their coins, the number of active miners and the network hash rate will likely continue to grow and the BTC market will eventually remain strong.

The way fiat currencies are weakened by current events could further contribute to the rise of BTC. If you already have mining equipment, it might not be a bad idea to get one now. Now, if you want to get involved in Bitcoin mining, you can either wait for new miners to come out, or altcoin mining might be a better alternative.

With Bitcoin’s block reward halving from 12.5 BTC to 6.25 BTC, Binance is running a bounty program with tasks to complete during the activity period, giving away a total of 12.5 BTC!

Apply for a 10% discount on cryptocurrency trading fees: https://1stminingrig.com/go/binance10/

Thanks for reading. As always, we welcome your comments, suggestions, and questions.

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