Thematic Spotlight: Bitcoin ‘Halving’ Puts Miners on the Chopping Block

Bitcoin has been one of the best performing assets of 2024. At its peak of US$73,000 in March, it had returned more than 140% year-over-year.1 But amidst all the trading excitement, the Bitcoin mining industry has been preparing for the arrival of one of its biggest challenges – the ‘halving’. Forecasted to occur on 20th April, the Bitcoin ‘halving’ is a once-every-four-years, pre-programmed system event on the Bitcoin blockchain which slashes the rewards Bitcoin miners receive by half.2

While the ‘halving’ is generally well received by traders as it usually precipitates a rally in the Bitcoin price, for Bitcoin miners, it marks a dramatic economic shift which threatens their viability. Currently, the Bitcoin blockchain rewards its miners 6.25 Bitcoins per ‘mined’ block. Each day, roughly 144 blocks are mined, and given the current price of Bitcoin at ~US$64,000, that means Bitcoin miners compete over a daily revenue pool of roughly US$58 million.3 On a yearly basis, that translates to more than US$21 billion shared between all miners. In less than a week, that yearly revenue pool will be halved, meaning Bitcoin miners will lose access to more than US$10 billion of potential earnings.4

As the competition for Bitcoin revenue intensifies, Bitcoin miners will be forced to continually upgrade their existing hardware to their most efficient and latest iterations to maintain sustainable earnings. Inevitably, this also means smaller, less efficient miners will likely shutter their operations as profitably shrinks. Furthermore, Bitcoin miners’ historical claim to low-cost electricity may also be in peril as AI datacentres, often with the backing of powerful tech firms, have emerged as key competitors for cheap and sustainable energy.5

Bitcoin itself, however, will likely be unaffected by the plight of Bitcoin miners. Historically, Bitcoin has returned an average of 139% per year in the four years following each of its prior halvings – with the 2024 Bitcoin halving just around the corner, Bitcoin investors may only be at the beginning of an exciting ride to come.6

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Forecasts are not guaranteed and undue reliance should not be placed on them. This information is based on views held by Global X as at 16/04/2024. Investing involves risk, including the possible loss of principal. Diversification does not ensure a profit nor guarantee against a loss.

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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information is not intended to be individual or personalised investment or tax advice and should not be used for trading purposes. Please consult a financial advisor or tax professional for more information regarding your investment and/or tax situation.