Countdown to Bitcoin Halving; Will mining still be profitable in 2024?

The leaders of the mining industry believe that the upcoming halving and the price performance of Bitcoin in the post-halving period are of special importance for both large and small miners, and these two factors can have a direct impact on the profitability of miners of this digital currency. But what are the consequences of halving for miners and how to prepare for the post-halving era?

Cointelegraph media with several large companies active in the field of Bitcoin mining a conversation has been to examine the expected impacts of halving on the mining industry and its implications for both large and small miners.

The Bitcoin protocol is designed to halve the reward given to miners for extracting each block from the network in approximately 4-year periods (210,000 blocks at a time). Previous halvings occurred in 2012, 2016, and 2020 respectively, and the upcoming halving will occur in mid-April 2024 (April 1403). After the fourth halving in the history of Bitcoin, the reward for mining each block for miners will decrease from the current 6.25 BTC to 3.125 BTC.

The reduction of the mining reward due to the direct impact on the return on investment on special mining hardware, as well as the current overhead costs of miners, is one of the things that Bitcoin miners should pay special attention to in their plans.

The need to focus on increasing productivity in mining

In the post-halving era, productivity in Bitcoin mining farms will become more important than ever. Jaime Leverton, CEO of Hut8, one of the largest Bitcoin mining pools operating in Canada and the US, says the upcoming halving will force miners to become more productive in order to stay afloat.

Hut8 Group regularly releases software specifically designed to increase the productivity of its mining farms in Canada. Lorton, their company, hopes to be able to complete its proposal to buy 4 power plants in Ontario and in this way provide the energy needed for its activities better than before.

Lorton says:

We have long been bullish on Bitcoin mining and price appreciation over time, and we believe that miners who are best prepared for the halving will be in an inside position after this event. [از نظر درآمدی] will be placed.

In November 2023, Hut8 underwent a massive merger with the American Bitcoin mining company USBTC, which increased the hash rate of the complex from 2.6 to 7.3 exahash/s.

Taras Kulyk, CEO and founder of SunnySide Digital Group, which provides infrastructure for active mining, says about the connection between halving, Bitcoin price and network fees:

If the upcoming halving is not accompanied by an increase in price or an increase in network fees, miners with low productivity will be forced to stop working.

According to Kulik, miners will continue to keep the Bitcoin blockchain secure as long as the economic incentives they are paid to accept the risks of doing so.

Kulik also said:

Having will not be a problem for most of the big miners; Because they have been waiting for this event for years and have included the reduction of the mining reward in their plans.

Colin Harper, director of research at Luxor mining pool, like other experts, emphasizes increasing productivity and predicts that small miners will be out of the competition after the halving.

Harper says:

Assuming that the price of Bitcoin [بعد از هاوینگ] If it doesn’t experience a spike and the price of hash, one of the criteria for calculating the profitability of mining, doesn’t increase, miners with high running costs and low productivity devices will leave the network.

The importance of Bitcoin price performance after halving

Adam Sullivan, CEO of Bitcoin mining company Core Scientific, says the consequences of the halving will depend entirely on Bitcoin’s price performance, which will determine how many miners will continue to operate after the event. gave

Sullivan said:

The lower the price of Bitcoin, the more devices will leave the network, resulting in a fix for mining [کاهشی] will experience more.

Sullivan’s more technical view is that miners’ success after halving depends on their ability to strike a balance between overall processing power and the efficiency of their hardware compared to other competitors.

Sullivan believes that although it is possible that some miners will be forced to stop their activities, the nature of the Bitcoin protocol always allows mining to survive.

He says:

The Bitcoin network has the ability to self-heal and in the long run always provides incentives to continue mining.

Harper has a similar opinion and says that the mining industry will not face a big shock after the halving; Because there are always miners who have cheaper electricity and as long as Bitcoin has value, there will be mining.

Kulik is somewhat more optimistic than other experts and hopes for the positive impact of the Ordinals protocol on increasing transaction processing fees as well as attracting new developers to this blockchain. Therefore, he believes that Bitcoin mining will be a profitable and sustainable activity in 2024.

Forget the Bitcoin death spiral

During the previous Bitcoin halvings, there were also discussions about a theory called “Bitcoin’s Death Spiral”. The basis of this theory is the sharp decrease in mining profitability and the subsequent decrease in the overall hash rate due to the withdrawal of miners from the network.

Since the difficulty of Bitcoin mining is adjusted every 2 weeks based on changes in the network’s overall hashrate, some have suggested that the network will suffer due to the lengthening of block times and the inability to process transactions in a timely manner.

Adam Back, CEO of Blockstream, however, is sure that such a scenario is impossible. This cryptography expert has reacted to similar talk during previous bitcoin halvings.

Beck says:

Mining profitability has more than doubled for this year (2023). Therefore, if this figure is reduced to half after the halving, miners are still in a better position compared to January (2023).

Beck believes that large companies active in the field of Bitcoin mining have made accurate calculations about the effects of halving, and in the past, this has been associated with a decrease in the overall hash rate of the network and the stoppage of the work of some miners.

Beck explains:

Miners who are least productive in their activities will leave the network. Miners with equipment with an energy efficiency of 35-40 joules per scratch are literally twice as bad in terms of efficiency as others.

Beck has also pointed out that the rate of increase in the price of Bitcoin in 2023 was more than the growth of the hash rate this year. Accordingly, it is assumed that the next halving of Bitcoin can be followed even without reducing the hash rate; Because, to put it simply, it will reduce miners’ profits to mid-2023 levels.

Miners who have had a good financial situation and management of reserves have continued to operate until today, and others have increased their capacity in anticipation of the halving and the usual price growth after this event.

As the experts mentioned in this article, the activity of miners in 2024 largely depends on the price performance and efficiency of their equipment.