Halving Bitcoin will be an easy challenge for inefficient ops: mining experts.

Bitcoin's halving could wreak havoc on small and inefficient Bitcoin miners, but shouldn't pose a problem for well-established players, industry executives said.

In less than a month, Bitcoin miners will face the reality of reduced rewards, which is expected to significantly affect profitability and income. Bitcoin mining CEOs tell Cointelegraph that the efficiency and scale of mining operations will be critical as companies strive to share in the reduced rewards.

Marathon Digital, one of the largest mining companies in North America, is among the players that plan to cut in half. Adam Swick, the company's chief development officer, told Cointelegraph that the halving would be an attempt to showcase the most efficient and well-funded entities.

“While the immediate effect is reduced rewards and profitability, these companies are stronger in terms of their ability to access capital and efficient operations,” explains Swick, who cautions that less profitable small operations may not be halved.

According to Michael Bennett, co-founder of OceanBit, the importance of miners' operational efficiency, accounting and capital structure will come to the fore.

“Miners with debt burdens and matured securities will be sold on the off chance that they reduce their debt service in the post-halving cycle when competition becomes more intense and operational efficiency becomes king,” Bennett said.

History also plays a role, as miners have four years to predict and plan how to manage operations. According to Greg Beard, CEO of Stronghold Digital Mining, the previous halving forced mining companies to adapt to lower margins. As profit margins shrink, Beard says miners will have to sell BTC to pay more efficient miners:

“I expect some Bitcoin miners will feel pressured to convert BTC to cash to show progress.”

Swick also made a similar prediction, saying that Bitcoin's new all-time high transaction fees and continued demand for mining services may boost profitability temporarily, but will eventually put pressure on it.

“If miners don't set aside enough resources to deal with the halving, we'll see some firms sell their BTC holdings or even go out of business to preserve capital in extreme cases,” says Swick.

Half of Bitcoin is embedded in the blockchain code. Mining of 210,000 blocks each, which takes an average of four years, has been cut in half. In the year Starting with 50 BTC produced in 2009, it will be 3.125 BTC when the fourth halving occurs in April 2024.

High hashing power competing for block rewards makes the network more competitive than it has ever been. Stronghold's CEO said the situation could change as low-efficiency miners face the reality of low profitability.

I would expect the hashrate to be halved since less efficient machines are not loaded. The question is, how big will this fall be?” That's what it says.

Marathon's chief development officer added that the halved construction provided ample opportunity to gain capacity.

In December, Marathon announced that it would acquire two working Bitcoin mining sites from Generate Capital in a deal that will close in early 2024.

Stronghold's CEO added that the halving build was a “quarter of mining economics” driven by miners adding capacity to their rigs without appreciating bitcoin prices.

$SDIG CEO Greg Beard recently joined the @mattxmccoy podcast to discuss the biggest misconception in the #Bitcoin mining industry – in less than 60 seconds.

You heard Greg's answer. what is yours pic.twitter.com/f1mFUlCuiE

— Stronghold Digital Mining (NASDAQ: SDIG ) (@Stronghold_DM) February 21, 2024

“The recent approval of the EFF supports the recent run on Bitcoin's price and has exacerbated the existing supply/demand imbalance, so miners who can lower costs are poised to win half as Bitcoin's price rises,” Beard said.

Happy halving

Miners are under no illusions about the reality of reduced block rewards and profitability impacts. However, there seems to be an air of confidence from industry players.

Related: Energy-efficient miners in the US are less likely to be halved by Bitcoin.

Swick predicts significant consolidation in the Bitcoin mining world, stemming from profitability concerns and the desire to sell off websites. He also expects to see more technologically advanced mining hardware and larger operating areas being built, as well as improved energy harvesting solutions that allow miners to support costs.

“Mining can become decentralized as miners look for unique captive energy assets and situations where they can become not only customers but also added value to energy producers.”

Meanwhile, Bennett predicts significant growth for the price of BTC, reflecting the influence of currencies traded directly on Bitcoin exchanges in driving the level of demand for Bitcoin. It highlights that only BlackRock and Fidelity Bitcoin ETFs have accumulated an average of 5,000 BTC per day in the nine weeks since their approval in the US.

“As the daily production of new bitcoins halves from 900 to 450, while global demand remains constant or increases, we will see continued growth in the price of Bitcoin.”

Bitcoin was trading at $65,000 for a total market capitalization of $1.2 trillion, making it the world's most valuable asset at the time of publication.

Institutional demand led by investments in Bitcoin ETFs and speculation of a downturn are the macro forces that keep Stronghold's CEO optimistic. “We have to remember that we are still in the early stages of Bitcoin adoption,” Beard says.

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