By the end of Friday, the size of reward to exploit bitcoin will be cut in half. The event—called halving—occurs approximately every four years and it can cause death for miners competing to obtain newly minted cryptocurrency.
“You don't see that in any other industry,” said Charles Chong, chief strategy officer at Foundry, a company that mines bitcoin and provides services to other miners. “You're on the treadmill. If you don't keep running, you will be left behind.” The only silver lining, he said, is that “you have a lot of time to prepare.”
During each halving, miners can no longer cover their costs. turn off their computer. Smaller, backyard operations are available completely closed. When unprofitable mining equipment is removed from the network, the Bitcoin system recalibrates, reducing the amount of computing power (and therefore cost) needed to win new coins. Over time, equilibrium is restored, so that mining becomes profitable again for those who can withstand the initial shock.
But this time is different.
In March, bitcoin price increased to a record high more than $70,000 per coin, thus reducing the danger to mining companies. In this case, although mining revenue will be halved, the associated income will still be greater than the cost of operating the hardware, many miners claim.
“If [the price of] “Right now, prices are providing relief to a lot of people,” said Asher Genoot, CEO of mining company Hut 8.
After each previous halving, the price of bitcoin increased, resulting in speculate about the prospect of another price hike. But the economic design of the system by itself there is no guarantee that this pattern will be repeated. Problems for miners will arise if the bitcoin price moves in the opposite direction. Because bitcoins Challenge conventional valuation methods, its price tends to fluctuate suddenly and violently. Mining companies must ensure that they are not caught off guard.
In 2021, as bitcoin prices rose to record highs, many mining companies got it horribly wrong. They took over big debt to fund expansion and post their mining equipment as collateral. The following year, as bitcoin prices crashed and energy costs soared, they Struggling to pay off debt and was forced to auction their facilities at cut price and hand over the hardware to the lender. Some have gone bankrupt.
Mining companies are implementing different strategies to protect against this situation. Genoot said Hut 8 has built up a large bitcoin treasury and instead of exchanging coins for dollars after mining, they are betting on further price increases. The money is not a “crutch” to help offset losses, Genoot said, but rather a reserve fund that can be used to buy discounted hardware or facilities from competitors. is weakening.
