It has only been 3 months into 2020 and Bitcoin has already witnessed a turbulent time in the digital asset space. However, a major event which is yet to commence in 2020 is the Bitcoin halving.
Bitcoin halving is one of the mechanisms in the BTC code, which is irreversible and inevitable. Bitcoin’s anonymous developer, Satoshi Nakamoto included a slash in supply in order to cope up with inflation and over the past two halvings in 2012 and 2016, miners have managed to remain profitable after the reduction of block rewards.
However, the global financial market is currently undergoing a tumultuous meltdown amidst the impact of COVID-19, and Bitcoin’s current valuation was raising serious concerns for the miners.
Miners Profitability after Bitcoin Halving
Gate.io recent’s research on the Influences of Bitcoin halving indicated that historically, a halving event has triggered a price rise after a few months post halving and the hash rate has improved as well.
The major concern was Bitcoin has never experienced a halving amidst a global financial crisis. Although popularly deemed as an uncorrelated asset, BTC’s increased correlation with S&P 500 rang bearish alarms across the industry, raising questions about Bitcoin’s valuation post halving.
In light of the scenario, a study was conducted to understand the price range of BTC above which miners will remain profitable posting halving.
The report explained that when BTC price drops below the cost or overall maintenance of a mining rig, it can no longer make profits from the block rewards.
The term used by the research is ‘shut-down price’ for miners which are self-explanatory with regards to Bitcoin’s value.
Analyzing the above charts and mining rigs available in the market, it can be identified that Bitcoin has to consolidate at least above $7234 post halving for miners to be profitable. The AntminerS19 Pro indicated the least shut-down price, but that particular rig is yet to be available in the market.
If we run an average shut-down price on all the 25 mining rigs, the average shut down price for Bitcoin came up to a whopping $25,385.
Additionally, the report stated that the possibility of miners switching their mining rigs would increase since they would need to be cost-effective in order to incur profit from BTC mining.