Bitcoin mining profitability won’t necessarily fall

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Bitcoin mining profitability won’t necessarily fall after the upcoming Bitcoin halving, despite a 50% Bitcoin (BTC) supply issuance reduction, Laurent Benayoun, the CEO of Acheron Trading, told Cointelegraph in an interview:

“In dollar terms, it’s not obvious that miners would be worse off after the halving, quite the opposite […] The decrease in mining rewards is going to be compensated by an increase in network fees.”

The Bitcoin halving is set to reduce block issuance rewards from 6.25 BTC to 3.125 BTC on April 19. Following previous halvings, smaller mining firms were forced out of business due to the decreased block rewards.

However, this will be different after the 2024 halving due to the increasing network fees boosted by Ordinals inscriptions and Bitcoin-native decentralized finance, or BTCFi, Benayoun told Cointelegraph:

“We’ve seen NFTs popping up on the Bitcoin blockchain, and we’ve seen a number of projects trying to build DeFi on the Bitcoin network. So all those elements are leading to an increase in network fees.”

Bitcoin network fees are transaction fees paid to incentivize miners to include a transaction in the following block.

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Average Bitcoin transaction fees are currently at $4.88 per transaction, down from $16.13 per transaction a month ago, on March 5. Bitcoin transaction fees rose over 86% during the past year, according to YCharts.

Bitcoin average transaction fees chart. Source: YCharts

Related: BTCFi innovation to match Ethereum DeFi in the future — MerlinSwap co-founder

Bitcoin mining companies would generally stay profitable if the Bitcoin price remained above the $70,000 mark, Joe Downie, the chief marketing officer of NiceHash, told Cointelegraph:

“If the price stays above $70,000, most miners will continue to be profitable since, at current block rewards, they are profitable at a BTC price of over $35,000. Less than that and they likely lose money.”

Bitcoin price fell 4.3% during the previous week to trade at $66,851 as of 10:22 am UTC. BTC has been trading below the $70,000 mark since April 1, according to CoinMarketCap data.

BTC/USDT, 1-day chart. Source: CoinMarketCap

Beyond Bitcoin’s price action, a mining firm’s profitability will depend on its mining equipment’s quality and energy efficiency. Downie explained:

“[Bitcoin halvings] make a lot of older hardware less profitable due to less reward received for the work done by the machine. Newer, more energy-efficient models will continue to be profitable though, so it does not depend on the size of the mining farm, but on the type of mining equipment.”

Bitcoin miner revenue recorded its second-best day in history on March 6, reaching $75.9 million a day after the Bitcoin price hit a new all-time high above $69,200.

Thanks to Bitcoin’s price appreciation, combined with the increasing network fees, fewer mining firms will be forced out of business compared to past cycles, says Acheron Trading’s Benayoun:

“We used to see in previous cycles in 2017 and 2021, less efficient mining operations being forced out of business. I don’t think this will be the case this time around, because of this increase in network fees.”

Related: Is the Bitcoin halving the right time to invest in BTC?