Bitcoin Halving: Is there a risk of a mass exodus of miners?

Bitcoin Halving: Is there a risk of a mass exodus of miners?

The recent Bitcoin halving has left cryptocurrency miners with significantly reduced profitability in mining Bitcoins. Halving the reward for mining during the halving event could force some miners to go out of business in the long term. The reward for adding a new block to the blockchain has been halved from 6.25 BTC to 3.125 BTC. At the same time, the cost of mining increases because with more blocks in the blockchain, more computing capacity is required.

The average production and cash cost per Bitcoin increased from $16,800 to $25,000 to a projected $27,900 to $37,800 in the third quarter of 2023, according to CoinShares estimates. The burden of increased costs is reflected in the fact that some miners have been forced to sell their reserves or stop mining altogether after halving events in the past.

A possible way out for miners would be an increase in Bitcoin prices. After past halving events, price increases regularly occurred, which led to an increase in the value of the cryptocurrency in the long term. Despite possible price corrections, miners should be sufficiently capitalized to ensure the theoretical profitability of mining.

Despite the challenges of the halving, experts like Asher Genoot from Hut 8 show no acute danger to the mining industry. The increase in energy costs and debt financing have changed the industry, reducing the risks of bankruptcy. However, smaller miners may continue to struggle following the block reward halving, which could lead to market consolidation and increased M&A activity.