According to a Bloomberg report published on March 13, 2020, Bitcoin (BTC) miners the world over are facing a serious crunch in terms of their profit amid the ongoing slump in the price of the premier cryptocurrency fuelled by fears over COVID-19.
Bitcoin Miners Facing the Heat
Amid the recent dramatic plunge in the price of BTC which saw its price crash by more than 40 percent in a matter of few hours, the miners of the premier cryptocurrency have more than enough to worry about.
In fact, the decline in BTC’s price couldn’t have come at a worse time as from May 2020 – when Bitcoin undergoes its scheduled halving – the amount of new BTC issued to miners will automatically drop in half which could initiate a further downward price movement of the digital currency. Of course, this also assumes that other major altcoins including Ether (ETH), and Ripple’s XRP will follow suit.
This becomes all the more interesting as, traditionally, Bitcoin halving has been seen as an extremely bullish development that generally preceded or follows a rise in the price of Bitcoin. However, as 2020 would have it, the sentiment is the exact opposite today.
Ryan Watkins, Analyst, Messari, said:
“It just really damages the Bitcoin halving narrative that people have been making. People were expecting price increases either before or after the halving, whereas now it seems like the exact opposite is going to happen.”
Old Miners Will Suffer More
Per Chris Bendiksen, head of research at CoinShares, for an average miner to be profitable today, the price of BTC has to be around $7,400. He said that a price of around $4,500, an average Bitcoin miner becomes cash-negative. Despite this, he added, many miners are unlikely to shut their shops as expectations for a rally continue to persist. However, if bulls don’t take over the reins soon enough, many miners are expected to leave the business, which could, subsequently, have a further impact on Bitcoin’s price.
Bendkinsen commented on how the efficiency of mining equipment could have an impact on the sustainability of the miners. He said:
“The miners that have predominantly new gear, they are probably fine. But then you have the previous generation ones, they are starting to sweat a little. If the prices remain like this, the halving will finish them off.”
Along the same lines, Sale Irwin, CEO, Greenidge Generation LLC, said:
“Based on our estimates, anyone using Antminer S9 or older generation miners is unprofitable unless their power cost is lower than 4 cents/kWh.”
“The drop in hash rate over the past 24 hours can be attributed to this dynamic, especially given the widely-accepted assumption that S9 miners still constitute the majority of miners in operation.”