Bitcoin ‘bloodbath’ halving could push US miners offshore

A possible drop in Bitcoin's price after the Bitcoin halving could increase the share price of high-cost public miners in the United States, forcing some to go offshore.

Jaran Mellerud, founder and chief mining strategist at HashLabs Mining, said, “We could see a bloodbath of mining stocks as investors realize these companies are making money,” referring to what could happen if the price of Bitcoin (BTC) doesn't rise significantly. After half.

Mellerud is looking at a window of three to four months after the halving to see how much mining profitability will put pressure on block rewards.

The largest #bitcoin mining countries are: 1) United States (40%) 2 China (15%) 3) Russia (12%).

This map will look very different in 1-2 years as miners in Africa and Latin America expand their operations.#Bitcoin Mining ⛏️ Machinery mercilessly saves the cheapest… pic.twitter.com/KD50g9mWHe

— Bradley Dean (@TBG9270584) February 17, 2024

According to CoinMarketCap, the next Bitcoin halving is expected to happen on April 24. It will reduce Bitcoin mining rewards from 6.25 BTC ($321,000) to 3.125 BTC ($160,500), despite historical increases in Bitcoin prices.

In the redemption event that ended on May 11, 2020, Bitcoin traded at $8,750 and increased more than 430% five months later, from $11,500 in October to $61,300 in March 2021.

But if bitcoin doesn't make a big run in three to four months, “a significant portion of the network may have to shut down their machines, especially those that pay $0.07 per kWh or more for hosting,” Mellerud said. A large number of these ineffective mines are found in the United States.

As a result, Melerud expects some of the Bitcoin hash rate to shift from the US to cheaper electricity rates, particularly in Africa and Latin America.

“My company, HashLabs, is currently seeing a lot of interest from US-based miners who want to move their machines to Ethiopia, and the hosting costs are 30-40% lower than in the United States.”

Being among the lowest cost operators, Bitcoin mining is one of the least risky industries in the world.

— Jaran Mellerud ⛏️ (@JMellerud) February 18, 2024

Profitability Concerns At the end of January, Cantor Fitzgerald reported that 11 publicly listed Bitcoin miners said they would not take a profit if the price of Bitcoin stayed around $40,000 (Bitcoin's price at the time).

Cantor Fitzgerald's “all in one penny” measure refers to the total costs a Bitcoin miner spends on producing one Bitcoin, including electricity costs, hosting fees and other financial costs.

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Today's new report from the research… pic.twitter.com/YgQ6XrIXh2

— Smatthew Schultz (@smatthewschultz) January 25, 2024

But with Bitcoin's price now sitting at $51,000, only four out of 13 mining companies break even.

However, Mitchell Askew, chief analyst at Bitcoin mining company Blockware Solutions, told Cointelegraph that most public miners in the U.S. operate at low electricity rates to be profitable, especially firms that bought more efficient machines during the bear market.

Askew countered Mailerud's argument that most inefficient miners are based in the U.S., saying they comprise only a small fraction of Bitcoin's total hash rate. As a result, any amount of hash lost in the US would be negligible.

But, even if it's not profitable, Askew says a few factors keep U.S. miners from moving offshore.

“[Many of them] They're locked into a fixed hosting contract that means they have to continue mining regardless of profitability,” he said, while others said that “know your non-Bitcoin customers and care less about profitability.”

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Ethiopia, Nigeria and Kenya are the African countries best positioned to capture a large share of the hash rate in the event of a mining migration event, Mellerud noted.

Ethiopia in particular has a “huge hydropower surplus,” and many Chinese miners are moving to mine, Mellerud said, adding that the African country will account for 5-10% of bitcoin's hash rate over the next two years.

Meanwhile, Mellerrud said Argentina and Paraguay are the most promising mining countries in South America.

An amazing trend to follow

Mining may be decentralized from the US to dozens of countries in Africa, Latin America, the Middle East and Asia.

— Alex Gladstein ⚡ (@gladstein) February 7, 2024

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