Bitcoin mining profitability does not fall after halving.
Bitcoin mining profitability will not fall after the upcoming Bitcoin halving, despite a 50% reduction in the supply of Bitcoin (BTC), Acheron Trading CEO Laurent Benayoun told Cointelegraph in an interview.
“In dollar terms, it's not clear that miners will be worse off after the halving, on the contrary […] The decrease in mining rewards is offset by the increase in network fees.
The Bitcoin halving on April 20 is set to reduce the reward from 6.25 BTC to 3.125 BTC. After the previous halvings, smaller mining companies were driven out of business due to block rewards.
However, this will be different after the 2024 half-year due to the increase in network fees due to formal writing and Bitcoin-native decentralized finance, or BTCFi, Benayoun told Cointelegraph.
“We've seen NFTs emerge on the Bitcoin blockchain, and we've seen a number of projects trying to build DeFi on the Bitcoin network. So all of these elements have led to an increase in network fees.
Bitcoin network fees are transaction fees paid to encourage miners to include transactions in the following block.
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Average Bitcoin transaction fees are at $4.88 per transaction, down from $16.13 per transaction a month ago, on March 5. Bitcoin transaction fees have increased more than 86% in the past year, according to YCharts.
Related: BTCFi innovation to match future Ethereum DeFi – MerlinSwap co-founder
Bitcoin mining companies will generally remain profitable if the price of Bitcoin stays above $70,000, Joe Dani, chief marketing officer at NiceHash, told Cointelegraph.
“If the price stays above $70,000, most of the miners will continue to be profitable, because with the current reward, they are more than $35,000 worth of BTC. Anything less and they can lose money.”
As of 10:22 AM UTC, the price of Bitcoin is down 4.3% over the past week to trade at $66,851. According to CoinMarketCap data, BTC has been trading below $70,000 since April 1.
Beyond Bitcoin's price action, a mining company's profitability depends on the quality and energy of its mining. Danny explained:
“[Bitcoin halvings] Make many older hardware profitable due to the small reward received for the work done by the machine. Although new, more energy-efficient models remain profitable, it depends not on the size of the mine, but on the type of mine.
Bitcoin mining revenue recorded its second best day in history on March 6, reaching $75.9 million a day after Bitcoin's price hit a new all-time high above $69,200.
Thanks to Bitcoin's price appreciation combined with rising network fees, fewer mining companies will be forced out of business compared to previous cycles, Acheron Trading Benayoun says.
“In previous cycles, we've seen a lot of efficient mining going out of business in 2017 and 2021. I don't think this will happen this time because of the increase in network fees.”
Related: Is Bitcoin Halving The Right Time To Invest In BTC?
