The possible sluggishness in the price of Bitcoin after the Bitcoin halving could sink the stock prices of high-cost public miners in the United States, forcing some even to move abroad.
“We could see a bloodbath in mining stocks as investors realize these companies are barely making any money,” says Jaran Mellerud, founder and chief mining strategist at Hashlabs Mining, referring to what could happen if the price of Bitcoin (BTC) is not increasing substantially. after halving.
Mellerud is now looking at the three to four month window after the halving to see to what extent miners' profitability is pressured by the reduction in block rewards.
the biggest #bitcoin The mining countries are:
1) United States (40%)
2) China (15%)
3) Russia (12%)This map will look very different in a year or two as miners in Africa and Latin America expand their operations.#Bitcoin Mining platforms ⛏️ will ruthlessly pursue the cheapest… pic.twitter.com/KD50g9mWHe
—Bradley Dean (@TBG9270584) February 17, 2024
According to CoinMarketCap, the next Bitcoin halving is expected to occur on April 24. It will reduce Bitcoin miners' rewards from 6.25 BTC ($321,000) to 3,125 BTC ($160,500), although it has historically been followed by an increase in the price of Bitcoin.
At the last halving event, on May 11, 2020, Bitcoin was priced at $8,750 and rose more than 430% five months later in October, from $11,500 to $61,300 in mid-March 2021.
But if Bitcoin doesn't achieve strong performance before that three or four month interval, “a significant portion of the network could have to shut down its machines, particularly those paying hosting fees of $0.07 per kWh or more,” Mellerud said, adding that a large concentration of these inefficient miners are in the United States.
As a result, Mellerud expects some of the Bitcoin hash rate to shift from the United States to countries with cheaper electricity rates, particularly in Africa and Latin America.
“My company, Hashlabs, is currently seeing significant demand from US-based miners who want to move their machines to Ethiopia, where hosting fees are 30-40% lower than in the United States.” Joined”.
Bitcoin mining is one of the least risky industries in the world if you are among the lowest cost operators.
– Jaran Mellerud ⛏️ (@JMellerud) February 18, 2024
Concerns about profitability resurfaced in late January when Cantor Fitzgerald reported that 11 publicly traded Bitcoin miners would not exploit profitability after the halving if the price of Bitcoin remained around $40,000 (the price of Bitcoin in that moment).
Cantor Fitzgerald's “everything per coin” metric refers to the total costs a Bitcoin miner would incur when producing a single Bitcoin, including electricity costs, hosting fees, and other out-of-pocket expenses.
*BREAKING: new today!
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Today's new report from the investigation… pic.twitter.com/YgQ6XrIXh2
– S. Matthew Schultz (@smatthewschultz) January 25, 2024
But with the price of Bitcoin now at $51,000, only four of the 13 mining companies are now below breakeven.
However, Bitcoin mining company Blockware Solutions chief analyst Mitchell Askew told Cointelegraph that most US public miners would operate with electricity rates low enough to remain profitable, especially companies that They bought more efficient machines during the bear market.
Askew responded to Mellerud's argument that most inefficient miners are based in the US, saying that they only account for a minor portion of Bitcoin's total hash rate. As a result, any lost hash rate in the US would be negligible.
However, even if it is not profitable, Askew says that some reasons will prevent American miners from moving abroad.
“[Many of them] “They are locked into a fixed hosting contract where they must continue mining regardless of profitability,” while others mine for the sole purpose of accumulating Bitcoin other than Know Your Customer and are less concerned about profitability, Askew said.
Related: Riot, TeraWulf and CleanSpark are the miners best positioned to halve Bitcoin – CoinShares
Mellerud touted Ethiopia, Nigeria and Kenya as the African countries best positioned to capture a larger proportion of the hash rate should a mining migration event occur.
Ethiopia, in particular, has a “huge surplus of hydropower” and several Chinese miners are moving there to exploit, said Mellerud, who expects the African country to gain between 5% and 10% of the total hash rate. of Bitcoin in the coming years.
Meanwhile, Mellerud said Argentina and Paraguay are the most promising mining countries in South America.
A fascinating trend to follow
Mining could be decentralized from the US to dozens of countries in Africa, Latin America, the Middle East and Asia, where many of the sites are off-grid, making the Bitcoin network much more robust https:// t.co/ia6zxECEw9
—Alex Gladstein ⚡ (@gladstein) February 7, 2024
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