Miners Need to Prepare, According to Fidelity

Fidelity Digital Assets have stated in a recent report that while Bitcoin (BTC) holders typically anticipate the quadrennial reward halving to boost prices, miners must actively strategize to plan for the upcoming event to prevent going bankrupt.

Notably, the halving event, expected on or around April 19, will reduce their earned Bitcoin by 50%.

Bitcoin Miners’ Challenges as Halving Nears

According to analyst Daniel Gray, miners must sustain their current hash rate, energy consumption, and infrastructure and face ongoing competition from the entire network, all striving to maintain profitability amidst the same challenges.

Bitcoin miners usually exhibit bullishness as they persistently mine a commodity they anticipate will appreciate over time. The report emphasizes that miners must be proactive rather than merely maintaining their position within the network if they are to profit.

Gray highlights that miners must continually strive to increase their hashrate efficiency, secure lower-cost energy from more economical sources, and expand their infrastructure to accommodate new machines. However, given the competitive landscape, every miner vies for the same resources.

Fidelity notes that the period following the halving poses significant challenges as Bitcoin adjusts to the immediate reduction in rewards, necessitating miners to possess capital reserves to cushion the decline in revenue.

Nonetheless, the report suggests that new layers could introduce fresh use cases and attract more users as the protocol evolves. Despite the historical trend of weaker miners exiting the market post-halving, the industry has consistently rebounded with increased miner participation and hashrate, showing the resilience of both the network and the industry.

Notably, previous halvings in 2012 and 2016 saw the hashrate dip temporarily before rebounding.

Bitcoin Price Could Drop

While Bitcoin’s recent surge to over $69,000 has been remarkable, analysts at JPMorgan caution that the asset’s forthcoming halving event could exert downward pressure on prices, potentially leading to a dip to $42,000.

According to analysts, Bitcoin’s production cost has historically been a floor for its prices. Post-halving production costs could double to approximately $53,000, which might decrease the Bitcoin network’s hashrate as fewer miners compete to produce BTC. The projected $42,000 price level is also where the analysts anticipate that Bitcoin prices will stabilize once the halving event’s euphoria subsides after April.

Alessandro Cecere, head of marketing at mining pool Luxor, notes that even if the mining reward halves, miners could still maintain profitability if Bitcoin’s price reaches $100,000, maintaining their earnings over time.