The losses of miners after the halving were estimated at $10 billion. Where does this figure come from?

The losses of miners after the halving were estimated at $10 billion. Where does this figure come from?

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Author: Robert Strickland (crypto-journalist)
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The losses of miners after the halving were estimated at $10 billion. Where does this figure come from?

Bloomberg: Miner losses reach $10 billion after Bitcoin halving. Bitcoin miners face increasing competition for electricity from the artificial intelligence industry.


 

According to analysts' forecasts, the Bitcoin halving scheduled for April 19-20 could result in multibillion-dollar losses for mining companies. Citing surveyed experts, Bloomberg reports that losses could reach up to $10 billion.

Halving is a programmed reduction in the Bitcoin code's emission of new coins. Miners' earnings consist of rewards for mined transaction blocks and fees for processing transfers on the Bitcoin network.

After the April halving, miners' rewards for adding transaction blocks to the blockchain will decrease from the current 6.25 to 3.125 BTC. According to estimates by Hashrate Index analysts, Bitcoin's hash rate (the total computational power of equipment mining the cryptocurrency) may drop by 3-7% after the halving.

Experts believe that to maintain competitiveness, miners will need to constantly increase investments in equipment. An additional pressure factor is the growing competition for electricity from the artificial intelligence industry, which is rapidly developing and has significant financial resources.

According to Adam Sullivan, CEO of Core Scientific, miners are forced to compete for limited resources with major technology companies, which also require large amounts of energy for their data centers.

Public companies, considered pillars of the cryptocurrency mining industry in the United States, control only 20% of its computational power. This conclusion was reached by analysts at TheMinerMag company. The remaining 80% belongs to private miners. It is this group that could become the most vulnerable after the upcoming halving due to limited access to capital markets.

According to Young Cho, head of Blockhouse Digital, miners are facing difficulties in obtaining loans. By estimates, in 2022, before the onset of the "bear market," miners borrowed a total of up to $4 billion, using mining equipment as collateral. However, after the cryptocurrency market crash in the same year, the situation changed dramatically. Many lenders went bankrupt, significantly limiting miners' ability to attract new borrowed funds.

Public mining companies increased their bitcoin reserves to the level of June 2022. The three largest companies control 74% of the total mined bitcoins. In March 2024, the leaders were Marathon, Riot, and Hut8, with a combined reserve of more than 46.2 thousand bitcoins (approximately $3 billion). In March, miners' revenues, according to analytical services estimates, reached a record $2 billion. Of this amount, about $85 million accounted for transaction fees, also a record monthly figure.

Taking advantage of significant income, some public mining companies report that they are selling the mined cryptocurrency and using the proceeds to upgrade equipment or expand space in data centers. In early March, the American Bitfarms announced that it would spend $240 million on purchasing more efficient equipment to adapt to the consequences of halving. Marathon Digital, the largest mining company in the United States, spent over $200 million in less than six months on acquiring data centers to host equipment.

Fred Thiel, CEO of Marathon Digital, the largest American cryptocurrency mining company, believes that the impact of the upcoming halving is already reflected in the price of bitcoin. He notes that for profitable bitcoin mining after the halving, the price of the first cryptocurrency should be at least $46,000.

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