Bitcoin Halving Report from Grayscale, the World’s Largest Digital Asset Manager: “This Time It Will Be Very Different”

Grayscale, the world’s largest digital asset manager, will take place in April 2024. Bitcoin published a report suggesting that the halving event could be fundamentally different from previous ones due to significant on-chain activity and positive market structure updates.

New Bitcoin issuance will halve around April 2024. Despite potential short-term challenges for miner revenues, underlying on-chain activity and positive market structure updates could make this halving completely different, according to analysts. According to the report, here are the things that should be taken into account in the upcoming halving, unlike previous halvings.

Faced with decreasing block reward revenue and high production costs, miners prepared by raising funds through equity/debt issuance and reserve sales.

Significant fundraising efforts such as Core Scientific’s $55 million equity offering, Stronghold’s $15 million equity raising, and Marathon Digital’s ambitious $750 million hybrid equity raising underscore the industry’s proactive stance in shoring up reserves, analysts say. Collectively, these measures suggest that Bitcoin miners are well positioned to weather the upcoming challenges, at least in the short term.

According to Grayscale, even if some miners exit the market altogether, the resulting drop in hashrate could lead to an adjustment in mining difficulty, potentially lowering the cost per coin for the remaining miners and maintaining the balance of the network.

According to analysts, the emergence of Inscriptions has revived on-chain activity. As of February 2024, more than 59 million Non-Fungible-Token-like (NFT) collectibles have been written, generating more than $200 million in transaction fees for miners. This trend is expected to continue, fueled by renewed developer interest and continued innovation in the Bitcoin blockchain.

The success of Inscriptions had its own effects on the Bitcoin network. As block rewards decrease over time, the question of how to incentivize miners to secure the network becomes more urgent. While transaction fees from transactions in these tokens currently account for approximately 20% of total miner revenue, this emerging trend of inscription activity offers a new way to maintain network security through increased transaction fees for now.

Continued adoption of Bitcoin ETFs could significantly absorb selling pressure and potentially reshape Bitcoin’s market structure by providing a new, stable source of demand that is positive for the price.

*This is not investment advice.