Bitcoin Halving Brings Potential $10 Billion Loss for Crypto Miners

In a couple of days, the Bitcoin network will experience a dramatic event named "halving." It is a special update that happens approximately once in four years and it reduces the reward for the miner who gets for supporting the blockchain and protecting it from external threats. It directly reduces the newly extracted bitcoin per day from 450 to 900. This might translate to $10 billion as a total annual revenue lost by the miners given the current value of a bitcoin.

In the past, the halving events have fuelled Bitcoin’s price rally, more than offsetting the decrease in network mining reward. Nevertheless, what if this time will be the last one? Mining companies now have to struggle with the sharper rise in two things, which pushes their operational costs higher.

After that, the difficulty of mining, which is a measure of the computing power needed to mine the Bitcoin, has approximately six times since the previous halving. A greater number of miners seeking rewards causes the appetite for high-end machines to rise sharply.

In the second place, miners come against the problem of finding affordable electric power. The big tech firms enjoy the benefit of longer tenure which makes them prioritized by the utility companies over low revenue start-ups. In this case, the profits of crypto mining are unsteady because of the prices of Bitcoins. This causes miners to become less appealing customers to utilities.

In addition, some traders have decided to go short on mining stocks because both factors lead to stagnant prices. A 2 billion dollar worth of short positions in 15 crypto-mining stocks were recorded, which is about 14.9% of the digital assets' outstanding shares.

To overcome revenue losses, one can turn to the acquisitions of smaller firms and buying new equipment that Marathon Digital Holdings Inc. and CleanSpark Inc. are doing. The management is canvasing this strategic option to withstand any possible effects during the planned halving of their operations.

While the cryptocurrency's value plunge complicated the mining activity, it at the same time encouraged the expansion of mining operations. The total market capitalization of stock-listed miners since the introduction of special mining equipment is about $20 billion when the last observed data was in late 2013.

Nevertheless, the impact of the halving may be observed differently among the large group of private miners (accounting for around 80% of the computing power used in the US industry) and larger miners with more advanced equipment. These ventures use mostly debt financing or venture capital, which can be more difficult to secure during market correction.

Financing deficit is the central issue of many aspirants of mining and they are turning to other alternative ways of funding, i.e., private equity and cash reserves, to fill in therein. Nevertheless, those having problems with revenue assurance in the future could be uncertain about their presence in the market.

Essentially, the approaching halve-event poses challenges as well as favorable implications for Bitcoin miners. According to projections, the revenue decline could be experienced by miners. However, shoulders remain for smart investent and evolution so that some miners will earn through crypto mining in the changing landscape.