The price of Bitcoin could experience a slowdown following the upcoming Bitcoin halving, potentially causing the share prices of high-cost public miners in the United States to plummet. Jaran Mellerud, founder and chief mining strategist of Hashlabs Mining, warns that investors may realize these companies are barely profitable if the price of Bitcoin does not increase significantly after the halving. Mellerud is closely monitoring the three to four-month period after the halving to assess the impact on miner profitability due to the reduction in block rewards.
According to CoinMarketCap, the next Bitcoin halving is expected to take place on April 24. This event will decrease Bitcoin miner rewards from 6.25 BTC ($321,000) to 3.125 BTC ($160,500), although historically it has been followed by a surge in the price of Bitcoin. In the previous halving in May 2020, Bitcoin was priced at $8,750 and experienced a more than 430% increase over the next five months, reaching $61,300 by mid-March 2021.
However, if Bitcoin fails to make a significant rally before the three to four-month interval, Mellerud believes that a significant portion of the network may have to shut down their mining machines, especially those paying higher hosting rates of $0.07 per kWh or more. He notes that a large concentration of these inefficient miners is located in the United States. Consequently, Mellerud predicts that some of Bitcoin’s hash rate will shift from the U.S. to countries with lower electricity rates, particularly in Africa and Latin America.
Concerns about profitability arose in late January when Cantor Fitzgerald reported that 11 publicly-listed Bitcoin miners would not be profitable after the halving if Bitcoin’s price remained around $40,000. However, with Bitcoin’s current price at $51,000, only four out of the 13 mining firms fall below the profitability threshold. Mitchell Askew, head analyst at Bitcoin mining firm Blockware Solutions, disagrees with Mellerud’s claim that most inefficient miners are based in the U.S., stating that they only represent a small portion of Bitcoin’s total hash rate.
Askew argues that even in the event of unprofitability, most U.S. miners would not move offshore due to fixed hosting contracts or their focus on accumulating non-Know Your Customer Bitcoin rather than profitability.
Mellerud identifies Ethiopia, Nigeria, and Kenya as the African countries best-positioned to attract a larger share of the hash rate in the event of a mining migration. Ethiopia, in particular, benefits from a surplus of hydropower and has seen an influx of Chinese miners. Mellerud expects the country to capture 5-10% of Bitcoin’s total hash rate over the next few years. Additionally, he highlights Argentina and Paraguay as the most promising mining countries in South America.
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