2024-07-24 04:40:00 ET
Summary
- The bitcoin halving event in April 2024 reduced the block reward for miners, which is expected to increase bitcoin’s price over time due to reduced supply and steady demand.
- Miners face revenue challenges from the reduced block reward, especially if bitcoin’s price does not rise quickly, compounded by high electricity costs and the need for specialized hardware.
- The mining industry is adapting through mergers, improving operational efficiency, and diversifying revenue streams, with well-capitalized firms better positioned to thrive.
By Christopher Gannatti, CFA & Blake Heimann
We just passed the 20th of July 2024, and approximately 90 days have passed since the pivotal bitcoin halving event in April. As a reminder, when we say "halving," we are referring to the reward paid to miners for correctly solving the proof-of-work algorithm. Roughly every four years, the bitcoin protocol specifies that the reward paid to miners is cut in half (50, 25, 12.5, 6.25, 3.125, etc.). Why is the block reward reducing? Well, there will only ever be 21 million bitcoin, so for that statement to be true, there needs to be a mechanism to create the new supply, but not to do so indefinitely, and to ultimately wind down as the system gets closer and closer to this level. While Bitcoin was flirting with all-time high price levels earlier in the year, nearing $74,000, it is clear that the near-term trend in the price of this asset has changed....
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For further details see:
Bitcoin Halving And Mining Update: Mid-2024 Perspective