December 11, 2023

Bitcoin miners could face major challenges due to the upcoming halving event, says a new report from analysts at banks and financial firms JPMorgan.

report shows bitcoinThe price and transaction fees of Bitcoin need to rise significantly to balance the reduced block rewards.

Uneasy times ahead for miners

Analysis predicts potential difficulties bitcoin As the hash rate, which represents the computing power used to mine cryptocurrencies, hit new highs, miners were also affected. Factors such as fluctuating electricity costs and increased competition among miners are expected to increase production costs.

this halving eventOccurring approximately every four years, miners’ rewards will be cut in half. “The upcoming Bitcoin halving event in April/May 2024 could be a stress test for Bitcoin miners,” said the report, co-authored by JPMorgan analyst Nikolaos Panigirtzoglou.

This event lowered the issuance reward from 6.25 BTC to 3.125 BTC, effectively reducing miners’ income while also increasing miners’ income. Bitcoin production costs. The report explained that while the Bitcoin halving typically has a positive impact on the price of Bitcoin, as production costs have historically acted as the bottom line, it presents a considerable challenge for miners.

“(The halving) will reduce the issuance reward from 6.25 BTC to 3.125 BTC, which means less income for miners while effectively increasing the production cost of Bitcoin (…) Therefore, while the Bitcoin halving is seen as having Production costs have historically been a bottom line, which has had a positive impact on the price of bitcoin, which poses a challenge for bitcoin miners,” the report states.

Hashrate Fluctuations and Energy Costs

Based on the global average electricity cost of $0.05/kWh, the current cost of mining a bitcoin is about $20,000. According to public blockchain browser data, the current value of a bitcoin is about $30,000. JPMorgan highlighted the volatility of hashrate, hinting at a range of energy sources and potential advantages for miners with access to cheap electricity.

The company revealed that for every cent increase in cost per kWh, the cost of producing Bitcoin increases by $4,300.after halving eventthis sensitivity is expected to double, increasing the risk and sensitivity of higher-cost producers (in simple terms, they will effectively be “priced” out of the Bitcoin mining playing field).

Institutional Support and the Importance of Bitcoin Price Rally

The report also noted growing institutional interest in bitcoin mining as a source of support for struggling miners, citing examples such as Galaxy Digital and Gray scale investment.

The report states:

“After the April/May 2024 halving event, if Bitcoin’s price does not rise consistently above its cost of production, or if transaction fees increase substantially, offsetting the decline in Bitcoin’s hash rate, Bitcoin’s hash rate will It seems unlikely that it will continue to rise at the same pace. Issue rewards.”

Nonetheless, to offset lower block rewards, JPMorgan emphasized bitcoin price Transaction fees must grow substantially. The analyst further pointed out that if the trend of declining interest in cryptocurrencies does prove to be a long-term trend, the decline in enthusiasm for cryptocurrencies may pose an additional challenge to miners’ income.

Disclaimer: This article is for informational purposes only. It does not provide or be intended to be used as legal, tax, investment, financial or other advice.