A report by TradeBlock predicts that mining 1 BTC could cost USD 12,525 after the halving. It is estimated that only 30% of the mining devices will be replaced by equipment of the latest generation.
Bitcoin investors speculate that the next Bitcoin halving could lead the price of the cryptocurrency to soar up to USD 90,000 or even at higher levels. However, the operators of the equipment used for mining Bitcoin consider that the halving event could represent a duplication of costs.
A recent report by the cryptocurrency ecosystem-focused research company, TradeBlock, estimates that the average cost to mine a single bitcoin (BTC) could increase to USD 12,525 after the reduction by half that will occur next May. This is almost twice the current average price, which is estimated at USD 6,851.
It can be seen that the new estimated cost is well above the current market price, already around USD 10,000, which gives a clear picture of how the reduction could turn around the profitability of the cryptocurrency mining industry if the market price does not increase.
Essentially, to obtain the same current number of bitcoins after the halving, miners will have to perform twice as many calculations. According to the report, this will also imply an equivalent increase in the use of electricity.
The halving was programmed into the initial code of the Bitcoin network as a defense against inflation when the currency was created more than a decade ago. The idea is that a predictable and increasingly slow pace in the supply of the cryptocurrency would help stabilize Bitcoin’s purchasing power. This system contrasts with the operation of government-backed fiat currencies, which can be printed at will by central banks.
Cryptocurrency mining companies are struggling to be prepared for the halving, improving their computer fleets and including processors of the latest generation, which are faster and more efficient in terms of energy consumption.
Researchers from JP Morgan Chase have said that the average cost that miners use to issue bitcoins is the “intrinsic value” of the cryptocurrency. It can be compared with the cost invested in oil drills to increase barrel production. If a fall in the market makes oil unprofitable, many drills will close that faucet until prices rise again.
According to the analysts’ estimate, the cost of issuing 1 BTC after the halving will be USD 12,525, if the computing power of the network (hash rate) remains at its current level. The analysis assumes a cost of electricity of 6 US cents per kW/h, which is greater than the 2 US cents that some large mining companies can obtain through the local network or wholesale purchase agreements.
Another debatable forecast of TradeBlock is that about 30% of the mining equipment will switch to the latest technology, whilst the other 70% will remain the same. Some executives in the cryptocurrency mining industry believe that many mining devices of previous generations may become less economical after the halving, which would leave the fastest teams as the dominant ones in the market.
John Todaro, director of digital currency research at TradeBlock, believes that this threshold deserves careful monitoring by Bitcoin investors.
Todaro concluded that it is important to know what miners are thinking and doing. He predicted that there may be profitable miners at those levels, but many others operating at a loss could disconnect their platforms.
By Alexander Salazar