When the sun is shining, miners of bitcoins are making money. The sector has recovered from its downturn thanks to the current spike in bitcoin prices. Miners are scrambling right now to lock in profits ahead of the "halving" of bitcoins, which will see the rewards for producing tokens cut in half.
It is projected that the next halving, which will slow the production of bitcoin — the total supply of which is set at 21 million, and 19 million of them have already been mined — will take place in April 2024.
Gregory Lewis, an analyst from brokerage BTIG that tracks the top 13 US-listed bitcoin miners, noted that there is a lot of rush to plug rigs in before the halving.
The Bitcoin hashrate — a measure of the computing power needed to create a coin — has reportedly achieved a record high, according to the cryptocurrency website Blockchain.com. It follows that miners will need to use increasing amounts of energy and speed to solve the difficult math puzzles that pay out in bitcoins.
JP Morgan analysts said that the hash-rate has grown at an unprecedented rate for 11 months, with a historic uptick in October.
Playing the game
Bitcoin has risen nearly 37% to approximately $37,000 in the past month after months of depression. In order to solve the puzzles and sell the freshly generated coins, miners have been inspired to link their potent computers so as to participate in this resurrection.
According to data from blockchain.com, the 30-day average revenue made by miners has increased gradually this year, reaching an 18-month high of $32.46 million on November 11.
However, mining, a very energy-intensive industry, is not as lucrative as it was at its peak in 2021.
According to mining data portal Hashrate Index, a gauge of miners' profits from utilizing 1 petahash a second of processing power in a day has increased to over $81 from $70 at the beginning of November, but it is still well behind a peak of $127 in early May.
Miners are searching for ways to prevent their profit margins from contracting in the fiercely competitive market, with six months left before their share of rewards is drastically reduced.
Sazmining's chief executive officer, William Szamosszegi, stated that every halving drives miners who are not playing the game at a sufficient level to be washed out.
Halving opportunity
In the past, the value of bitcoin has usually increased after halvings. The price increased from $12 to $126 six months after the halving in 2012. In only seven months after the second halving in 2016, it increased from $654 to $1,000, and during the same period of 2020, it skyrocketed from $8,570 to $18,040.
Following the third halving of the cryptocurrency in 2020, miner incentives were reduced to 6.25 bitcoin a block; the next halving is set for April, when the mining reward will drop to 3.125 bitcoin.The current block yield for mining is $231,250.
In order to remain competitive, a lot of mining businesses are modernizing their equipment and increasing their hashrate strength, according to Matteo Greco, an analyst of Fineqia International.
Some participants have turned their operations to countries in Central America in order to preserve the profit margins, as these nations have more favorable regimes and cheaper energy costs.
According to Ludovic Thomas, a portfolio manager of digital asset investment firm Criptonite Asset Management situated in Switzerland, it's still too early to determine if all of the bitcoin miners have left the woods. Network hash-rate and difficulty always rise in tandem with profitability.