Halving Bitcoin 2024 - Catastrophic revenues for miners?

The bitcoin halving scheduled for March 2024 will reduce miners’ rewards. However, according to a report from Cantor Fitzgerald, this drop in revenue could be catastrophic for many mining players if it is not offset by an increase in price.

Bitcoin mining, a capital-intensive industry

In 2024, bitcoin mining requires colossal technological means. Professional miners have massively invested in increasingly powerful computing hardware to have a chance of validating blocks and earning the associated bitcoin rewards. 

They also spend huge amounts on electricity to power their mining farms that count thousands of machines. According to Cantor Fitzgerald’s analysis, the average cost to produce a single bitcoin currently stands at around 8500 dollars.

A worrying drop in revenue

Up to now, the bitcoin reward granted for each validated block allowed many miners to partly compensate for these deficits. But after the halving planned for March 2024, this reward will be halved and could  fall to 3.125 BTC. 

A brutal reduction of 50% of the revenue, without an equivalent increase in price, would spell doom for most mining companies. Only those with the most aggressive production costs could hope to continue creating value.

According to the Cantor Fitzgerald report, this halving could even trigger a “crypto winter” and a wave of bankruptcies if the price of bitcoin remains so low. Mining would simply cease to be economically viable, leading to the collapse of the entire crypto ecosystem.

An indispensable increase to save the crypto sector

The report concludes that the price of bitcoin must see a substantial increase by the 2024 halving to avoid a catastrophic scenario. The long-term viability of the Bitcoin network depends on the survival of a sufficient number of profitable miners.

Without adequate price progress, only a tiny proportion of the most competitive bitcoin miners could weather this halving and continue mining. This would make the network much more vulnerable to attacks and compromise its decentralized integrity. 

So, the salvation of the bitcoin mining players appears to hinge on a new price surge by March 2024. If they want to avoid bankruptcy, they have no choice but to bet on the cyclical nature of the markets and hope that history repeats itself. Otherwise, the halving will toll the death knell for the majority of the Bitcoin mining industry.