According to a research report by JPMorgan, the hashrate of Bitcoin (BTC) continues to reach new all-time highs as miners compete in anticipation of the next halving event, expected in the second quarter of 2024. The halving will reduce the issuance rewards from 6.25 BTC to 3.125 BTC, which will increase the production cost of Bitcoin while potentially impacting miners’ revenues.
While the Bitcoin halving event is generally seen as positive for the Bitcoin price, historically acting as a floor for its value, it poses challenges for miners, according to JPMorgan analysts. Miners with lower electricity costs are expected to have an easier time surviving the halving, while those with higher power costs may struggle.
JPMorgan estimates that a change of 1 cent per kilowatt hour (kWh) in electricity costs could result in a $4,300 change in the production cost of Bitcoin. Following the halving, this sensitivity is expected to double to $8,600, making higher-cost producers more vulnerable.
The significant increase in hashrate reflects growing competition among Bitcoin miners, with more mining rigs being deployed. However, JPMorgan suggests that the hashrate may not continue to rise at the same pace after the halving, unless there is a sustained increase in the Bitcoin price above its production cost or a significant rise in transaction fees that could offset the reduction in issuance rewards.
Overall, the upcoming halving event poses challenges for Bitcoin miners, particularly those with higher electricity costs. The dynamics of mining profitability will likely be influenced by the Bitcoin price, transaction fees, and operational efficiency, as miners adjust to the changing rewards structure.