Energy-efficient miners in US less likely to be impacted by Bitcoin halving

9


Recent data from Hashlabs Mining found that 40% of Bitcoin (BTC) mining occurs in the United States. While notable, some industry experts predict that the next halving may push U.S.-based miners offshore

Raphael Zagury, chief investment officer at Swan Bitcoin — a Bitcoin-focused financial services company — told Cointelegraph that the upcoming halving will undoubtedly have a profound impact on U.S. miners, cutting their revenue in half. 

“This acts as a great filter, distinguishing between efficient, profitable miners and those less capable,” Zagury said.

The next halving event is set to occur in April, cutting the Bitcoin mining reward from 6.25 BTC to 3.125 BTC. The reduction in mining rewards will impact operations for miners globally. Yet regions with a large number of miners will likely face the biggest challenges. 

U.S. miners aim for energy efficiency post-halving

Haris Basit, chief strategy officer at Bitdeer — a publicly traded mining service provider — told Cointelegraph that the halving event is one of the most predictable occurrences in the crypto industry. 

Given this, he said that Bitdeer has been preparing for halving events years in advance to ensure its operations remain efficient.

Basit explained that low electricity costs are a priority for Bitdeer to keep its six worldwide mining facilities profitable.

Recent: ZK-proofs introduce security challenges for developers

He said: “Bitdeer regularly publishes its power costs and has one of the lowest costs of electricity in the industry. These costs vary from quarter to quarter and from location to location. We are constantly working on lowering our energy cost and have multiple ongoing efforts which we believe will have a significant impact in the future.”

With three mining facilities based in America, Basit further explained that the halving’s impact on its operations within that region greatly depends on the price of Bitcoin at the time of the event.

“If the price of Bitcoin stays around the current levels, we expect that there will be some decline in the global hash rate. This includes the U.S. operations of some companies.”

The Bitcoin network’s hash rate measures the total computational power used by miners. Data from BitInfoCharts shows that the network’s hash rate has steadily risen since April 2021, reaching all-time highs during January 2024. Yet a decrease in block rewards, coupled with the high energy usage required for mining, may result in miners going offline after the halving.

“Of course, the effect will disproportionately fall on those mining operations that have the highest costs,” said Basit. “But if Bitcoin price is substantially above the current levels, then the effect will be very different.”

Jamie McAvity, CEO at Cormint Data Systems — a Bitcoin mining company based in Ft. Stockton, Texas — told Cointelegraph that approximately 50% of mining computers currently have an efficiency between 30 and 40 joules per terahash.

He said: “This equates to an electricity breakeven price of about $.08/kilowatt-hour. If the halving were to occur today, many of these computers would no longer be able to mine profitably, as that would require an electricity cost of $.04/kilowatt-hour or lower.”

McAvity further anticipates that there will be difficulty adjustments following the halving. Bitcoin mining difficulty measures how challenging it is to solve the cryptographic puzzles used during the mining process. As Cointelegraph previously reported, mining difficulty has steadily risen since January 2023.

“We think there will be little hash rate growth throughout summer 2024, as the market environment of lower mining breakevens will be coupled with peak summertime electricity demand and the corresponding high prices,” he said.

Yet, the upcoming halving presents several challenges for miners, and McAvity explained that Cormint, like Bitdeer, has been preparing for such difficulties.

According to McAvity, Cormint had the lowest energy cost of any reporting miner during the first half of 2023. McAvity also shared that Cormint’s mining fleet will respond to electricity pricing and only mine during profitable periods after the halving.

“We anticipate that we will curtail our mining fleet more often in 2024 than in 2023 due to the halving, as this will help us remain profitable,” he said.

McAvity said that miners with the ability to vary uptime in response to decreasing breakevens would be in the best position to remain profitable after the halving. On the other hand, he believes that miners with hosting contracts with fixed uptime requirements and rates of $.055/kilowatt-hour or higher may see their profitability become negative.

Global hash rate will continue to increase

Yet, even with the challenges associated with the upcoming halving, industry experts still believe that Bitcoin’s global hash rate will increase post-halving.

“Despite potential short-term declines, the hash rate’s history, barring significant events like China’s mining ban in May 2021, shows resilience and growth,” Zagury remarked.

Indeed, China managed to reemerge as one of the largest mining hubs in 2022, just one year after Chinese regulators banned operations in the region.

McAvity also remains optimistic, noting that while the hash rate will likely decline from April through October, an all-time high may occur afterward. “October 2024 will coincide with the conclusion of the summer, and most miners will be operating at high uptimes,” he said.

While this may be, McAvity mentioned that these predictions may only hold true in the current Bitcoin price environment. “If Bitcoin rallies dramatically, it will create a strong mining incentive, and the halving may have very little impact on mining economics,” he said.

Recent: Solana outage raises questions about client diversity and beta status

Either way, Basit shared that Bitdeer alone has over one gigawatt of new facilities planned over the next 24 months. “These expansions, coupled with improved efficiency in mining rigs, lead to significant growth in global hash rate,” he said.

Basit added that the price of Bitcoin would also have to rise to support significant increases in the global hash rate.

“Which brings up the other aspect of halving: that it has always been followed by a boom cycle for Bitcoin. We expect Bitcoin price to continue to support long-term increases in global hash rate,” he said.