Bitcoin BTC’s upcoming halving is creating high anticipation in the cryptocurrency space as previous halvings have triggered significant price spikes. However, as the 2024 halving approaches, concerns are emerging about the potential negative impact on some miners. High mining costs and increasing debts in the sector cast a shadow over profitability. As miners prepare for this situation, many may face significant difficulties or even have to exit the market. Let’s look at the details.
Bitcoin mining and the challenges ahead
The 2024 Bitcoin halving event is expected to boost the price of the cryptocurrency. However, it has negative effects on miners. Jaran Mellerud, a crypto mining analyst, estimates that almost half of miners will struggle due to the higher costs associated with the process. He states that the cost of the break-even electricity price will increase. It will also cause difficulties for miners with higher operating costs.
Research experts state that the net profit of many miners operating less efficiently could turn negative. On the other hand, he warns that their sustainability could be compromised.
Rising debt and competitive pressures
The Bitcoin mining industry is currently operating under significant debt from the long bear market in 2022 and rising electricity costs. Miners migrated from China to North America in search of better opportunities after the mining ban. In addition, this led to an increase in debt.
Ethan Vera, COO of Luxor Technologies, emphasizes that the debt of the sector ranges from 4.5 billion to 6 billion dollars. These loans include senior loans, loans secured by mining equipment. On the other hand, there are Bitcoin-backed loans. Amid increased competition, miners’ profit margins have fallen. In addition, the difficulties they faced increased even more.
Preparing for halving
Bitcoin miners are taking proactive measures to mitigate the impact of the halving. Strategies such as securing favorable energy prices, strengthening financial reserves and reducing investment activities are being implemented. Despite these preparations, Tiffany Wang, CEO of Texas-based Bitcoin miner Lotta Yotta, believes that many operators will still face significant risks and potential elimination from the market.
cryptocoin.com The high-risk nature of the halving year requires careful financial planning and preparation for miners. Mining difficulty reached a record level in June, emphasizing the competitive nature of the industry. Bitcoin price will need to reach the $50,000-60,000 band next year in order to maintain profit margins after halving. The outcome of the halving will have significant implications for miners and the overall landscape of Bitcoin mining. As the industry overcomes these challenges, it will be crucial to strike a balance between profitability and sustainability.
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