How Will Bitcoin Halving Affect Miners & Strategies for Survival

Dec. 19, 2024

Author: Bitcoin Magazine Pro Team

Bitcoin halving is a major event in the life cycle of Bitcoin that takes place every 210,000 blocks, or roughly every four years. Halvings cut the reward for mining new Bitcoin blocks in half, which reduces the rate at which new BTC enters circulation. Halvings are significant for Bitcoin miners because they affect profitability and can influence miner behavior and the network’s security.  This article will offer valuable insights to help them achieve their goals, like understanding what is Bitcoin halving and how Bitcoin halving impacts their profitability, and be equipped with effective strategies to adapt, optimize operations, and thrive in a challenging market.

To help miners better prepare for the next Bitcoin halving, this article will leverage Bitcoin analysis as a valuable tool to achieve their objectives, such as understanding how Bitcoin halving impacts their profitability and being equipped with effective strategies to adapt, optimize operations, and thrive in a challenging market.

What Is the Bitcoin Halving and Its Importance

bunch of bitcoins - How Will Bitcoin Halving Affect Miners

Bitcoin halving is when the reward for Bitcoin mining is cut in half. Halving takes place every four years. The next halving is expected to occur sometime in 2028.

Halving's Impact on Bitcoin's Value

The halving policy was written into Bitcoin’s mining algorithm to counteract inflation by maintaining scarcity. In theory, the reduction in the pace of Bitcoin issuance means that the price will increase if demand remains the same.

Bitcoin's Inflation Rate and Supply

At the moment, Bitcoin has an inflation rate of less than 2%, which will decrease with further halvings, says David Weisberger, CEO of trading platform CoinRoutes. The currency's inflation rate is relatively easy to calculate since there is a set supply of Bitcoin at any given point.

Investor Perspective

“Bitcoin’s production scarcity is what defines its finiteness, and when reward goes down, supply is constrained,” says Chris Kline, chief operating officer of Bitcoin IRA. “Increasing demand at a time when supply is constrained has a positive impact on price, which can make Bitcoin alluring to investors.”

The Mechanics of Bitcoin Halving

A decentralized network of validators verifies all Bitcoin transactions in a process called mining. They are currently paid 3.125 BTC when they are the first to use complex math to add a group of transactions to the Bitcoin blockchain as part of its proof-of-work mechanism. At Bitcoin’s current price, 3.125 BTC is worth about $200,000. 

That’s a decent incentive for miners to keep adding blocks to keep Bitcoin transactions running smoothly. Those blocks of transactions are added roughly every 10 minutes, and the Bitcoin code dictates that the reward for miners is reduced by half after every 210,000 blocks are created. That happens roughly every four years in periods often accompanied by heightened Bitcoin price volatility. 

When is the Next Bitcoin Halving?

The Bitcoin algorithm dictates that halving events occur based on a specific number of blocks created. While the exact timing of the next halving is uncertain, experts anticipate it will occur around April 2028. This is approximately four years after the last halving, which occurred on April 19, 2024.

Halving's Impact on Bitcoin's Price

The predictable nature of halving events is intentional, designed to minimize disruptions to the network. These events often spark significant trading activity and price volatility.

  • Pre- and Post-Halving Volatility: Rob Chang, CEO of Gryphon Digital Mining, notes that price volatility is typically heightened before and after a halving event.
  • Long-Term Price Trend: Despite short-term fluctuations, Bitcoin prices tend to increase in the months following a halving event.

Cautious Optimism

While scarcity can drive price appreciation, Richard Baker, CEO of TAAL Distributed Information Technologies, warns that reduced mining activity could stabilize prices.

David Weisberger emphasizes the importance of focusing on the overall growth of the Bitcoin network. As the network expands, Bitcoin's potential to become a global store of value increases. 

The History of Bitcoin Halving

The first Bitcoin halving occurred in November 2012, followed by subsequent halvings in July 2016, May 2020, and most recently, April 2024.

Halving's Impact on Miner Rewards

Initially, miners were rewarded with 50 BTC per block. With each halving, this reward is reduced by half. For instance, after the first halving, the reward decreased to 25 BTC per block.

The Final Halving and Beyond

The final halving is expected to occur in 2140 when the total number of circulating Bitcoins will reach 21 million. After this, miners will rely solely on transaction fees for revenue.

Potential Implications of the Next Halving

  • Miner Migration: As the next halving approaches, miners may focus on higher transaction fees to compensate for reduced Bitcoin rewards.
  • Network Security: A decrease in miner participation could compromise the network's security.
  • Price Volatility: The halving event, which reduces the supply of new coins without affecting demand, could lead to significant price increases, according to economic theory. The extent to which halving directly impacts price movements remains debatable.

Despite potential challenges, higher Bitcoin prices could incentivize miners to continue processing transactions, ensuring the network's continued operation.

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How Will Bitcoin Halving Affect Miners

woman holding a bitcoin - How Will Bitcoin Halving Affect Miners

On April 19, 2024, a significant event occurred in the world of Bitcoin: the halving. The reward for Bitcoin miners was reduced from 6.25 BTC to 3.125 BTC per mined block.

The Impact of Halving

While the halving event itself may not have caused immediate market fluctuations, it has significant implications for the future of Bitcoin.

  • Reduced Supply: The halving mechanism reduces the rate at which new Bitcoins are introduced into circulation.
  • Increased Scarcity: This reduction in supply can lead to increased scarcity of Bitcoin.
  • Potential Price Impact: The shift in supply-and-demand dynamics can influence the long-term price trajectory of Bitcoin and the broader Bitcoin market.

What Just Happened? 

Reducing the supply of new Bitcoin, the halving mechanism enhances scarcity. This can potentially drive long-term price increases. The relationship between halvings and price movements is complex and influenced by various market factors.

Market Reaction: Increased Interest

As Megan Stals, a market analyst at Stake, notes, "Bitcoin trading volume generally sees the most significant increase in the 60 days prior to halvings." This trend was evident in March 2024, as investors sought increased exposure to Bitcoin.

How Does This Affect Miners? 

The Bitcoin halving event can challenge smaller mining operations, particularly as mining rewards decrease. However, higher Bitcoin prices leading up to the halving can help offset increased costs in the short term.

As Megan Stals, a market analyst at Stake, explains, "Miners face a profitability squeeze [after the halving] event, due to the increased compute power and energy needed to mint new coins." While larger mining operations may have the resources to adapt to these challenges, smaller miners may need help to stay competitive.

The Future of Bitcoin Mining

Miners must focus on investing in efficient hardware and finding cost-effective energy sources to maintain profitability. The halving event is a critical mechanism in Bitcoin's design, ensuring a limited supply of 21 million coins. By increasing the difficulty of mining, the network aims to control inflation and maintain its long-term value.

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How Bitcoin Miners Can Survive a Hostile Market

bitcoin on laptop - How Will Bitcoin Halving Affect Miners

The 2024 Bitcoin halving is imminent, and miners face a new challenge. With approximately 94% of all Bitcoin already mined, only 1.35 million coins remain to be discovered.

The Halving Mechanism

The halving event occurs every 210,000 blocks, roughly every four years. The next halving is anticipated in 2028. After this event, miners will need to work harder to earn rewards.

Adapting to the New Reality

While the halving presents challenges, it may mean something other than reduced profitability. Miners must adapt to the changing circumstances and adopt strategies that maximize their earnings.

What Are the Most Important Things After Halving? 

The profitability of Bitcoin mining decreases after every halving due to the reduced block reward. Miners can tackle the challenges posed by halving events and market fluctuations by prioritizing the following three strategies to remain profitable: 

Minimize Expenses

As the Bitcoin halving approaches, reducing costs becomes crucial for miners. One effective strategy is to rent hashing power or mining hardware remotely.

The Rise of Cloud Mining

Cloud mining has gained popularity due to its convenience. By purchasing a contract, users can outsource the maintenance and operation of mining rigs to a provider. In return for regular payments, the provider ensures the mining process runs smoothly, allowing users to profit from Bitcoin's price growth.

Remote ASIC Rental

Another option is to rent ASIC miners remotely. This eliminates physical maintenance and provides flexibility in selecting rigs with specific parameters.

Cheap Electricity

Renting mining hardware from a reliable provider can offer significant cost advantages. These providers often locate their facilities in special economic zones that offer optimal conditions for miners, including access to affordable energy.

The ECOS Example: A Case Study

Let's consider ECOS, a provider headquartered in a free economic zone in Armenia. This zone offers several benefits for miners:

  • Government Approval: The Armenian government actively supports Bitcoin and blockchain technology.
  • Tax Exemptions: Zone residents enjoy tax and customs duty exemptions for 25 years.
  • Stable and Cheap Energy: The Hrazdan power station near ECOS facilities ensures a reliable and cost-effective energy supply.
Turnkey Services for Miners

ECOS provides a comprehensive solution for miners, eliminating the need for individual management. Their services include:

  • ASIC Selection: Choose an ASIC from a trusted manufacturer.
  • Import and Logistics: The ECOS team handles legal import, customs clearance, and logistics within the free economic zone.
  • Secure Location: Your hardware will be placed in a secure location with a 6-month warranty and 24/7 armed security.
  • Performance Optimization: ECOS fine-tunes your rig for maximum performance.
  • Expert Maintenance: Skilled staff ensures your ASIC receives proper maintenance.
  • Repair Services: In case of breakdowns, ECOS offers on-site repairs at their service center.
  • Mining Pool Selection: ECOS specialists can connect your ASIC to a top mining pool like BTC.com or ViaBTC.
  • Performance Monitoring: A custom performance management system, accessible through your user account, allows you to monitor your mining efficiency.

Powerful Equipment 

To maintain profitability after the Bitcoin halving, investing in the latest generation of ASIC miners is crucial. These devices offer improved energy efficiency and higher hashrates, allowing you to optimize your mining operations.

The Antminer S21: A Promising Option

The Antminer S21, manufactured by Bitmain, is a prime example of a high-performance ASIC miner. You can benefit from lower energy costs and favorable regulations by hosting this device in a location like the Free Economic Zone of Armenia (ECOS).

Profitability Forecasts

Based on post-halving FPPS (0,0000008 BTC per 1 TH per 24h) and considering hosting expenses, the potential profits from an Antminer S21 can be significant:

  • BTC Price at $120,000: Estimated profit of $23,000
  • BTC Price at $150,000: Estimated profit of $31,000
Affordable Access to High-Performance Mining

While the initial cost of an Antminer S21 can be substantial, there are alternative options to participate in mining:

  • Remote ASIC Rental: Rent an ASIC remotely to avoid upfront costs and maintenance responsibilities.
  • Cloud Mining: Utilize cloud mining services to invest in mining without owning physical hardware.

ECOS provides both remote ASIC rental and cloud mining services, offering flexible and accessible ways to participate in Bitcoin mining.

Other Ways

Bitcoin Ordinals, a recent development in the Bitcoin ecosystem, have significantly impacted the network. These inscriptions, essentially NFTs on the Bitcoin blockchain, have driven a surge in transaction fees.

Impact on Miners

The increasing number of Ordinal inscriptions, currently surpassing 25.5 million, has led to a revenue boost for miners. As users seek to create and transact with these digital assets, they incentivize miners to process their transactions, leading to increased block rewards.

The Future of Bitcoin Mining

While the Bitcoin halving will reduce block rewards, Ordinals and other emerging technologies on the Bitcoin network offer new opportunities for miners to generate revenue. By adapting to these trends and exploring innovative strategies, miners can maintain profitability in the post-halving era.

When Is the Next Halving Event?

The next Bitcoin halving is expected to occur in 2028. This event will reduce the block reward by half, limiting the supply of new Bitcoin. While this typically leads to increased price appreciation, other factors, such as regulatory changes, macroeconomic conditions, and adoption rates, also influence Bitcoin's price.

Miner Profitability in the Post-Halving Era

The halving event has a significant impact on the profitability of Bitcoin mining. Miners earn approximately $0.055 per day per terahash (TH) of mining power.

Profitability of Different Antminer Generations

Here's a breakdown of the profitability of various Bitmain Antminer models:

  • S19 Series: Older generation miners that are currently unprofitable due to increased mining difficulty and reduced rewards.
  • K Pro: These models generate minimal monthly profit, typically less than $50.
  • S21 Series: The most profitable option, with monthly earnings exceeding $100, ensuring a return on investment even at current Bitcoin prices.

Related Reading

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  • List of Bitcoin Halving Dates
  • Bitcoin Halving Analysis
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  • StockCharts vs. TradingView
  • TradingView Alternative

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