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Market News Miners of Bitcoin Confront Obstacles as the Halving Approaches; Prices May Fall

Miners of Bitcoin Confront Obstacles as the Halving Approaches; Prices May Fall

Bitcoin miners must devise a plan to survive the impending halving event, according to Fidelity Digital Assets, lest they face insolvency. The event will reduce their earnings by half, necessitating increased efficiency, cost-effective energy, and infrastructure expansion in order to maintain profitability.

TOP1 Markets Analyst
2024-03-11
10258

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CryptoPotato reports that Fidelity Digital Assets recently stated that Bitcoin (BTC) holders generally anticipate a price increase during the quadrennial reward halving. However, in order to avoid bankruptcy, miners are required to proactively devise strategies to prepare for the forthcoming event. Anticipated to transpire on or around April 19, the halving event will diminish the Bitcoin miner's earnings by 50%. Miners must maintain their present infrastructure, energy consumption, and hash rate, according to analyst Daniel Gray, despite ongoing competition from the entire network, which is also attempting to maintain profitability despite the same obstacles.

 

To generate profits, miners must adopt a proactive approach beyond simply preserving their position within the network. Gray emphasizes the imperative for miners to consistently improve their hashrate efficacy, procure energy from more cost-effective sources, and expand their infrastructure to accommodate newly acquired machines. Nevertheless, due to the level of competition, each miner contends for the identical resources. According to Fidelity, the time period subsequent to the halving presents considerable difficulties as Bitcoin adapts to the sudden decrease in rewards. As a result, miners are obligated to maintain capital reserves in order to mitigate the revenue decline. However, as the protocol evolves, the report indicates that the introduction of new layers may unlock novel use cases and appeal to a greater number of users.

 

In spite of the historical pattern wherein less powerful miners withdrew from the market after halving, the sector has consistently recovered with increased miner engagement and hashrate. This demonstrates the industry's and the network's resilience. Notably, following previous halvings in 2012 and 2016, the hashrate experienced a brief decline followed by a surge. Although the recent ascent of Bitcoin to a value exceeding $69,000 is noteworthy, analysts at JPMorgan warn that the impending halving event of the asset may impose negative price pressure, possibly resulting in a decline to $42,000. Analysts assert that the production cost of Bitcoin has traditionally served as a constraint on its price. Production costs could double to around $53,000 after a halving, which could reduce the hashrate of the Bitcoin network as fewer miners vie to produce BTC. Analysts also predict that Bitcoin prices will stabilize at the anticipated $42,000 level once the euphoria surrounding the halving event subsides after April. The director of marketing for mining pool Luxor, Alessandro Cecere, explains that miners could maintain profitability even if the mining reward were to decrease by half if Bitcoin's price reached $100,000, thereby sustaining their earnings over time.

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