Are You a Miner? Here’s How to Prepare for Bitcoin Halving

In April, the cryptocurrency market anticipates the Bitcoin halving, and this is causing diverse reactions among miners. While some may panic and hastily sell off their equipment to hedge risks, others are looking for new sources of income and are even ready to change the venture. Amid these changes, ordinary miners are concerned about how to sustain their income and navigate challenges posed by the halving.

How Will Halving Affect Miners?

Bitcoin halving is a process that cuts miners' rewards in half. This mechanism is built into the coin's algorithm as a safeguard against inflation and occurs roughly every 210,000 blocks, or every four years.

At its inception, miners were rewarded with 50 BTC for each successfully mined block. Following the initial halving, this reward was reduced to 25 BTC, then to 12.5, and subsequently to 6.25, the current reward. With the upcoming halving, the number of BTC will drop to 3.125.

The halving impacts miners' revenue directly, as they get income both from the blocks they mine and from network transaction commissions, with the bulk of their profits originating from the mined blocks. The 2024 event will nearly halve the cryptocurrency reward, compelling many miners to either shut down operations or adapt to the evolving landscape.

To sustain their current income, miners must either increase their coin yield or capitalize on a substantial price surge. While many anticipate a doubling in Bitcoin's value, such a surge may not happen immediately.

Miners utilizing outdated equipment and facing high electricity costs are likely to bear the brunt of the halving's effects. ASICs with low hash rates may fail to generate sufficient income to offset electricity expenses.

Conversely, some miners may opt to go offline, potentially leading to a decrease in network complexity and an uptick in income for those still operational. Subsequently, as more miners resume the activity, network difficulty is expected to rise again, ultimately recalibrating the system in the post-halving landscape.

How Will the Price of Bitcoin Change?

In anticipation of the halving, many analytical and financial companies are making forecasts. The historical trend suggests that Bitcoin (BTC-USD) price always grows after the halving event, but the asset began to rise even before this, reaching its ATH of $73,000 — a vivid demonstration of an old trading rule, “buy the rumors, sell the news.”

Analysts Predict a Bull Run

Founder and former CEO of Binance Changpeng Zhao suggests that the price of Bitcoin will not double the day after the halving. The cryptocurrency will reach its historical maximum in about a year.

Analysts at trading platform DecenTrader also believe that the ATH will not be reached until the fourth quarter of 2024. Such theories are based on previous halvings. During past halvings, it took about 220-240 days to break through Bitcoin's all-time high. This year will likely be a similar story.

According to analysts at the crypto-financial company Matrixport, Bitcoin will rise in price to $63,140 by April and to $125,000 by the end of next year.

Gracy Chen, the managing director of crypto exchange Bitget predicts a potential surge to “$120,000 to $140,000 in this bull market cycle.” Chen explains such optimism with the strong capital inflows caused by Bitcoin ETF approval.

The author of the book "Rich Dad Poor Dad" Robert Kiyosaki gives a precise timing for Bitcoin’s ATH, expecting it to reach $100,000 by June 2024. 

Some people think that the April halving is special. The Grayscale blockchain asset trading platform indicates high BTC activity due to the excitement around the new Ordinals project and BRC-20. According to it, NFTs can be placed on the blockchain, and miners can receive a reward for it. Among the features of this year, Grayscale considers the approval of spot Bitcoin ETFs. The company believes that miners will safely survive the 2024 halving due to such events.

Best Strategies for Miners Ahead of the Halving

Large mining companies began preparing for the Bitcoin halving in the early to mid-last year. Basically, miners follow three strategies. The first is to increase power by purchasing more efficient equipment. The second is reducing energy costs, for example, moving to a region with cheaper electricity prices or special areas for mining facilities. The third is accumulating BTC to cover expenses.

The main strategy is to purchase large quantities of new, more efficient equipment. For example, Marathon Digital (MARA) purchased 78,000 Antminer S19 XP mining machines. This is one of the most powerful models with a hashrate of 140 TH/s.

Another way is to reduce energy costs. To do this, the American Bitcoin miner CleanSpark developed and implemented software that will reduce the load on the network. Another mining company — Riot Platform — later improved this solution The companies signed an agreement with the authorities of Texas, agreeing to turn off ASICs during increased demand for electricity. Thus, Riot managed to save $27 million and earn $18 million by selling energy to other miners.

Historically, such moments have always been accompanied by renewed interest in Bitcoin and the formation of major bullish trends in the market. The period leading up to halving is traditionally seen as a time for accumulating cryptocurrency. Investors and market participants expect that this period of accumulation will be followed by a significant increase in the value of BTC. This makes the current moment especially attractive for long-term investments and investments in mining.

Considering the above-mentioned factors, the simplest strategy could be to accumulate as much cryptocurrency as possible. The price of Bitcoin may not skyrocket on the first day and even the month of the halving, reaching its historical maximum only in six months or a year. Until then, miners will have to pay constant costs for electricity and ASIC maintenance. The accumulated capital will help cover the loss of income.

Patience is a Must

Anyone who has been dealing with market volatility for months would say that the main thing to address any challenges is patience. Stocking up on more efficient equipment, reducing energy costs and finding new sources of income will help hedge all the risks connected with Bitcoin fluctuation.

Some miners do not switch off only for the first two months in the hope that the hashrate will decrease and the difficulty will drop. If this does not happen, they sell the equipment. Others are trying to purchase new devices with a hashrate of 100 TH/s before the halving. The higher it is, the greater the likelihood of maintaining income.

Whatever fluctuations occur, everything is leveled out by the course. Modern devices released over the past year will be able to generate greater profits. Those mining on older hardware will likely shut down. This is how the market works.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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