It is only a matter of days now before the Bitcoin halving event scheduled to take place, which will make all the crypto enthusiasts agog as it is expected to shake the market supply and propel Bitcoin prices upwards. In contrast, crypto mining is a hard nut to crack as miners might face hundreds of millions of dollars in revenue loss.
Bitcoin Miners Suffering From $10 Billion Losses
The event of halving is estimated to take place in the middle of April 2020, which will cut down the daily rewards from 900 BTC to 450 BTC. The possible reduction in rewards may lead to an annual loss of approximately $10 billion for the entire mining sector if Bitcoin’s price is taken as a reference.
In order to solve the potential issue, organizations like Marathon Digital Holdings Inc. and CleanSpark Inc., together with other miners, are investing in new mining equipment and buying out smaller competitors. These programs are aimed at buffering the unexpected revenue decline that will result from the halving event.
History of BTC Halving
Commenting on these developments, Matthew Kimmell, a digital asset analyst remarked: “In the next attempt, miners will try to maximize their revenue before their production is deeply affected. In the short term, revenues universally plunged and the strategic reaction of each miner, and how they adapt, may well determine who will be the winner and who will be left behind.”
Bitcoin has naturally demonstrated a high return potential after the Bitcoin halving events in the past. As a result, this has to some extent allowed the mining companies to compensate for the decrease in mining rewards and the increase in operating costs. Nevertheless, the mining sector faces the challenge of increased operational costs due to the need to invest in technology even though the returns are diminishing.
Bitcoin Halving: A Curse or a Blessing?
The skyrocketing price of Bitcoin, in this regard, has rendered these energy costs insignificant and has facilitated the expansion of cryptocurrency mining activities.
The mining of bitcoins since 2013 has seen the market capitalization of 14 miners listed in the United States grow from an initial figure of $20 billion as per a report from JP Morgan released on April 1.
Even though public miners are the key players in the industry in the U.S., they contribute only around 20% of the mining sector’s computing power, according to research data by TheMinerMag crypto research firm. The latter is the portion of the minted BTCs, which could be more vulnerable to the halving. Debt financing or venture capital is commonly used by private miners for operational needs which is a different case for public companies that have a chance to raise funds through share offerings.
The market is already indicating the possibility of the mining stocks being down with the growing eagerness around the event. The total short interest, including the dollar value of shares borrowed and sold by the bears, amounted to about $2 billion on April 11, according to S3 Partners LLC’s estimation. This is a short interest that is equal to 15% of the entire amount of shares in the group and that is thrice as much as the American average of 4.75%, as per Ihor Dusaniwsky, the managing director of predictive analytics at S3.
