As 2024 begins, bitcoin stands at $42,665 (Image: GETTY)
Bitcoin (BTC) investors are urged to remain efficient if they want their investments to remain profitable and operational after the halving in 2024.
As 2024 begins, Bitcoin stands at $42,665 (£33,809.03). Many people are optimistic due to Bitcoin’s potential for unprecedented growth.
One factor for this potential growth is the halving event scheduled for April 2024.
Leading Bitcoin mining players have unpacked the expected effects of the Bitcoin halving on the industry and the implications for small and large-scale miners.
Historically, halving events have been associated with significant upticks in Bitcoin’s value. This is because it reduces the reward for mining new blocks and, therefore, the rate at which new bitcoin is generated.
The halving event for Bitcoin scheduled for April 2024 (Image: GETTY)
Bitcoin’s protocol is hardwired to reduce the amount of BTC awarded to a miner for adding a block to the ongoing chain.
Mining reward halvings occur every 210,000 blocks, and with a block added to the blockchain every ten minutes, halvings come around every four years.
The next halving event will cut the Bitcoin mining reward from 6.25 BTC to 3.125 BTC. The previous halvings took place in 2012, 2016 and 2020.
This reduction in supply, coupled with a steady or increasing demand, is leading to a supply crunch.
The next halving event will cut the Bitcoin mining reward from 6.25 BTC to 3.125 BTC (Image: GETTY)
As a result, there may not be enough bitcoin available for purchase, which will drive the price higher to incentivise long-term holders to sell.
Hut8 CEO Jaime Leverton explained to Cointelegraph that the event will force miners to drive efficiencies in their operations to continue mining.
Mr Leverton said: “We have long been bullish on self-mining and the price of Bitcoin going up and to the right over time, and we believe the best-prepared miners will be positioned to capture upside following the halving.
“That’s why we were strategically expanding our mining operations inorganically this year and were able to increase our capacity through our merger.”
Interest rates have remained at 5.25% since September (Image: EXPRESS)
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Hut8 is actively rolling out purpose-built software to increase the efficiency of its Canadian mining sites.
Taras Kulyk, founder and CEO of Bitcoin mining infrastructure provider SunnySide Digital explained the direct correlation between the 50 percent reduction of block rewards and BTC price and fees.
There is an existing network of miners who will continue securing the Bitcoin blockchain as long as the economic incentives pay them for their risk to do so.
He said: “If that’s not met by increased Bitcoin price or increased transaction fees, lower-efficiency miners will need to shut down. The halving is baked into most of the larger miners. They’ve been expecting and pricing the halving into their projections for years now.”
Highlighting the advent of Bitcoin Ordinals in 2023, Kulyk is optimistic about the future of BTC and its influence on transaction fees and developer activity.
Coupled with the increased scarcity of new Bitcoin, 2024 could see Bitcoin mining continue to be a profitable and sustainable economic activity.
Core Scientific CEO Adam Sullivan said that the lower the Bitcoin price is, the more machines will come off the network, and the difficulty will adjust lower.
For Core Scientific, this resulted in a focus on keeping machines online to maximize the profitability of its mining fleet.
He added that the network will adjust as certain miners exit the industry or turn equipment off, freeing up a greater percentage of the block to reward participants who continue mining.
On a more technical note, Mr Sullivan said that miner success will be determined by their ability to manage the tradeoff between total terahash exposure and hardware efficiency compared to the market.
While some miners may be forced to shut down their operations, Sullivan believes that the nature of Bitcoin’s protocol will always allow for the continued survival of mining.
“The Bitcoin Network is self-healing and long term, will always incentivize mining to occur,” he said.
He added that the network will adjust as certain miners exit the industry or turn equipment off, freeing up a greater percentage of the block to reward participants who continue mining.
Bitcoin had a torrid 2022, defined by the collapses of major companies and projects, from stablecoin terraUSD to crypto exchange FTX.
Rising inflation led to higher interest rates in the U.S. and in other major economies, which in turn caused investors to flee bitcoin and other risky assets.
That has seen prices of several top digital currencies slump sharply from their all-time highs.
Despite its recent ascent to $30,000 (£23,772.90), bitcoin is still down more than 50 percent from the highs of November 2021.
