Bitcoin Miners Are Better Positioned for the Halving This Time Round: Benchmark
Bitcoin's rally in the past six months will help cushion crypto miners from the effects of the 50% cut in their earned rewards, the report said.
Apr 19, 2024 at 8:50 a.m. UTC:format(webp)/cloudfront-us-east-1.images.arcpublishing.com/coindesk/ZCUDHLPSB5EDBHDOIO2BDNJVI4)
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- Miners are better positioned for this halving due to the large gains in bitcoin in the last six months, the report said.
- If history repeats itself, bitcoin will enjoy a strong rally after the event, the broker said.
- A potential increase in network fees could offset the impact of reduced rewards, Benchmark noted.
Crypto miners are the group most affected by bitcoin's (BTC) reward halving, and they are better positioned this time round due to the cryptocurrency's gains in the past six months, broker Benchmark said in a research report on Thursday.
The largest cryptocurrency by market value rallied about 140% in the past two quarters, while ether (ETH), the second-largest, added 85%, CoinDesk Indices data show. The CoinDesk 20 Index, a measure of the broader crypto market, gained 115%.
The quadrennial event slows the rate of growth in bitcoin supply by 50% and is expected to occur late this evening or early tomorrow UTC.
Benchmark cited Haris Basit, the chief strategy officer of bitcoin miner Bitdeer Technologies (BTDR), who said the recent increase in the price of BTC could bail out many of the Bitcoin network’s less-efficient miners in the near-term.
Given bitcoin’s recent outperformance, the “role of the halving in driving the retirement of inefficient mining rigs and reducing the network hashrate would be much less dramatic than it would have been absent the rally,” Basit said at a Benchmark-hosted event.
“Most of the publicly traded bitcoin miners have initiated or announced plans to increase their electricity and hashrate capacities as a means of adjusting to their reduced revenue and gross profit profiles,” Benchmark analyst Mark Palmer wrote, noting that due to uncertainty around the halving nearly all of the listed miners’ stocks are down year-to-date despite a 46% rally in bitcoin in the same period.
“The impact of the halving on bitcoin miners’ economics could be more offset over time if history repeats and a strong rally in the price of the cryptocurrency occurs during the months following the event,” Palmer wrote.
The broker noted that a potential increase in network fees could also help to mitigate the impact of reduced block rewards.
The halving’s effect on the cryptocurrency’s price “could be magnified by the concurrent demand shock created by the emergence of spot bitcoin exchange-traded funds (ETFs) following their approval in the U.S. in January,” the report said. “We expect the inflows into spot bitcoin ETFs to grow dramatically once institutions begin to invest in them in earnest.”
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Will Canny is CoinDesk's finance reporter.