Miners predict potential outcomes of Bitcoin halving in 2024

The price of Bitcoin will significantly affect the impact on miners of the highly anticipated halving event in 2024.

Top Bitcoin miners or mining companies have been emphasizing the need to improve efficiency to maintain profitability and operations after the 2024 halving event. This event is expected to happen again approximately 114 days later, in April this year.

So, what do miners predict about the expected impact of this programmed event in the Bitcoin code on the industry and the impact on both small and large miners?

Bitcoin’s protocol is designed to reduce the amount of BTC given to miners when adding blocks to the active chain. Mining reward halving events occur every 210,000 blocks, and if a block is added to the blockchain every 10 minutes, then halvings will occur every 4 years.

The 2014 halving was the fourth such event, which would have slashed Bitcoin mining rewards from 6.25 BTC to 3.125 BTC. Previous halvings occurred in 2012, 2016 and 2020.

price performance chart Bitcoin In the previous three Bitcoin halvings | Source: bitcoinblockhalf.com/tradingview

Reducing mining rewards will have a certain impact on miners, directly changing profits and return on hardware investment as well as operating costs.

Emphasis on Bitcoin Mining Efficiency

Bitcoin mining efficiency is expected to play an important role during the halving. Hut8 CEO Jaime Leverton said the incident will force them to improve operational efficiency to continue mining.

Hut8 is actively deploying specialized software to increase the efficiency of Canadian mining operations. Leverton added that the company hopes to complete its previously announced bid to acquire four power plants in Ontario to power its operations.

Total capacity is 310MW, including the former 40MW North Bay site which the company had to abandon due to its long-running legal dispute with Validus Power. Hut8 plans to purchase the power plants from the company after it enters administration in September 2023.

Leverton explained:

“We have long been optimistic about self-mining and that over time, Bitcoin prices will move in the right direction. At the same time, we believe that the best-prepared miners will be able to take advantage after the halving. This is Why we have developed a strategy this year to expand our mining operations and add capacity through mergers.”

Hut8 completed a high-profile merger with the American mining company USBTC in November 2023, increasing its computing power from 2.6 EH/s to 7.3 EH/s in November 2023.

Taras Kulyk, founder and CEO of Bitcoin mining infrastructure provider SunnySide Digital, offered candid opinions, emphasizing the direct correlation between the 50% block reward reduction and BTC prices and fees:

“If this cannot be achieved by raising the price of Bitcoin or increasing transaction fees, then less efficient miners will need to go out of business.”

Kurek added that the current network of miners will continue to secure the Bitcoin blockchain as long as the financial incentives paid to them are enough to offset the risks of doing so.

“The halving is an integral part of most large mining companies. They have been anticipating this event and incorporating it into their forecasts for years,” Kurek said.

Colin Harper, Luxor’s head of research, also highlighted the importance of efficiency and the risk of smaller miners having to shut down equipment:

“Assuming that Bitcoin price and hash price (a measure of mining profitability) do not increase, miners will incur higher costs and less efficient miners will be eliminated from the network.”

Harper added that profits for small miners are likely to decrease in 2024 due to reduced BTC rewards. This has led many commentators to express the unanimous view that the price of Bitcoin needs to increase during and after the halving to increase profits.

price Seconditcoin is an important factor

Adam Sullivan, CEO of Core Scientific, said that the impact of the halving will depend entirely on the price of Bitcoin and will directly affect the number of miners still active:

“The lower the price of Bitcoin, the more machines are removed from the network and the difficulty adjusts lower.”

For Core Scientific, this has resulted in a focus on keeping machines running to maximize profits for the mining fleet. On a more technical note, Sullivan said miners’ success will depend on their ability to manage the balance between total terahash exposure and hardware performance relative to the market.

While some miners may be forced to shut down operations, Sullivan believes that the nature of the Bitcoin protocol will always allow mining to continue:

“The Bitcoin network is self-healing and will always encourage mining to occur in the long run.”

He added that when certain miners leave the industry or shut down equipment, the network will adjust, releasing a larger proportion of blocks to reward participants who continue to mine.

Leverton echoed these sentiments, noting that if Bitcoin prices rise exponentially in the coming weeks and months, large miners will continue to expand operations, maintain the network, and capture the upside potential.

Harper also believes that the mining ecosystem will not suffer a major impact after the halving, and the protocol design will always encourage miners to participate:

“There will always be miners who get cheaper electricity than other miners, so as long as Bitcoin has value, there will be miners.”

He also emphasized that the fundamental purpose of the mining difficulty adjustment mechanism is to serve as a balancing force to maintain miner incentives.

“That’s why the difficulty adjustment mechanism exists. If Bitcoin becomes unprofitable for most miners, then they shut down their equipment, hash rate drops, difficulty follows, and then for the rest of the drop, Mining will be more profitable for miners,” Harper explained.

Kulyk offered a more optimistic view, highlighting the launch of Bitcoin ordinal numbers in 2023 and its impact on transaction fees and developer activity. Coupled with the increasing scarcity of new Bitcoins, Bitcoin mining will likely remain a sustainable and profitable economic activity into 2024.

Forget Bitcoin’s Death Spiral

Previous halving cycles are also said to have had potential Bitcoin death spirals. This hypothetical scenario involves a sharp drop in profits and a concomitant drop in hashrate as miners are forced to leave the network.

Since Bitcoin mining difficulty takes two weeks to adjust to changes in hashrate, many predict the network will be hampered by longer block times and unable to process transactions in a timely manner.

Speaking in December 2023, Blockstream CEO Adam Back insisted that this scenario was unlikely to happen. The cryptographer, who pioneered the proof-of-work (PoW) algorithm in the Bitcoin protocol, reflects on the “disaster theory” surrounding previous halvings.

He added that these scenarios have never happened and economic data suggests miners may be in a better position in 2024:

“Mining profits have more than doubled this year. So if they halve at the halving, they’re still in a better position than they were in January, and hash power has been increasing during this time.”

Back also emphasized that experienced miners have conducted in-depth calculations to consider the potential impact of the halving, which includes a decrease in computing power and the capitulation of some miners.

“Those who give up will be the least productive. Miners that consume 35 to 40 joules per terahash device are twice as bad,” Back explained.

Ang also said that by 2023, the price of Bitcoin will increase to more than $40,000, which is more than twice the increase in computing power. Back believes that the next halving may occur without reducing hash rate, which will only reduce miner profitability to mid-2023 levels.

“Perhaps we can have a general trend of increasing hashrate until the halving.”

2023 will be a testing year for the Bitcoin mining industry. The increase in computing power in the first half of the year caused some miners to shut down due to the decline in Bitcoin prices.

Larger players with healthy balance sheets and reserves have managed to stay afloat, while some have even increased in anticipation of the halving and Bitcoin’s historic price rise of 2018, months ahead of the previous cycle production capacity.

As experts suggest, 2024 will largely depend on Bitcoin’s price performance and the efficiency of mining operations

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According to Cointelegraph