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With the halving implemented, innovations in the BTC ecosystem bring new opportunities for miners

Bitcoin Halving Completed

Introduction

On April 20, 2024, Bitcoin successfully completed its fourth halving at block height 840,000 (8:09:27 AM Beijing Time), reducing the block reward miners receive from 6.25 bitcoins to 3.125 bitcoins. With the completion of the halving, the crypto world’s quadrennial “storm time” officially begins.

This article will discuss from a data perspective, in conjunction with the current BTC ecosystem, what opportunities and challenges exist for miners.

Historical Review of Bitcoin Halving

Bitcoin halving refers to the event where the reward for mining Bitcoin transactions is halved (triggered after every 210,000 blocks mined), occurring approximately every four years. Halving is a unique feature of Bitcoin that ensures its long-term sustainability and scarcity as a digital currency while preserving its value.

Including this latest halving, Bitcoin has undergone four halvings, which took place on November 2012, July 2016, May 2020, and April 2024, Beijing time. Around the time of these Bitcoin halving events, Bitcoin prices generally experienced varying degrees of fluctuation.

Bitcoin Prices: In the 60-day periods before the four Bitcoin halving events, the price increases were -0.6%, 43.4%, 59.6%, and 25.4%, respectively. Funds tend to position themselves ahead of halvings, and with the marginal reduction in new Bitcoin supply across the network, the scarcity of Bitcoin increases. Historically, Bitcoin has seen significant price increases within 5-6 months after each halving. For instance, within 150 days following the halvings in 2012, 2016, and 2020, Bitcoin prices rose by 999%, 15%, and 24%, respectively.

Look Into Bitcoin Miner Revenue Total 1

Reviewing historical data is enlightening. However, the patterns observed this time cannot guarantee similar outcomes: The current cycle unfolds against a unique backdrop and has already shown to differ in significant ways from historical precedents, such as adjustments in global monetary policies and the approval of Bitcoin ETFs in multiple countries, which could potentially accelerate the onset of a Bitcoin bull market.

Impact on Bitcoin Mining

The most direct impact of Bitcoin halving on miners manifests as dynamic changes in the total network hash rate, as well as the cost battles due to the halving of income. Since the release of Bitmain’s Antminer S9 series in 2017, the total network hash rate has only experienced one significant fluctuation, which was caused by miner migration due to Chinese government policies. During other times, even as the BTC price faced significant drops, the continuous shipment of mining rigs by manufacturers led by Bitmain has kept the network hash rate in a state of growth.

Indeed, with fluctuations in coin prices and updates from mining rig manufacturers, we can observe multiple instances in the network hash rate charts where there has been a 5-10% decrease in total network hash rate. This represents the updating of mining rigs or the migration of hash power to regions with lower electricity costs.Reflecting on the recent performance of Bitcoin’s total network hash rate, the seven-day average hash rate has increased by 19% compared to the first quarter of 2024, reaching 611 EH/s. As of May 6, 2024, the seven-day average hash rate of Bitcoin stands at 604 EH/s, marking a 17% change since the beginning of the year and a 73% year-over-year change.

As mentioned earlier, mining costs are the decisive factor determining whether miners can survive through successive halving events. There are two core factors that dictate mining costs: the energy efficiency of the mining rigs and the cost of electricity. Electricity costs, being a fixed expense for mining operations, do not vary greatly among individual miners. The average cost of mining in North America is about 5-6 cents per kilowatt-hour, and the costs in Europe are similar. Here, we use 6 cents as the average global cost of electricity to discuss the impact of halving on mining profitability.

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Many media outlets like to use the shutdown price of Bitcoin as a metric for miner profitability, but I prefer to use the energy efficiency threshold as an important indicator. This highlights, under the current Bitcoin price, which models of mining rigs can still maintain profitability. The breakeven Bitcoin mining efficiency threshold chart shows the ratio of how many watts per terahash (TH) of hashrate a miner can consume before their revenue turns negative, based on different power costs. This chart displays the minimum energy consumption ratio for mining rigs when the average electricity cost is 6 cents per kilowatt-hour.

We have listed the mining rigs currently available on the market with an energy efficiency lower than 34 Th/W and displayed their profitability for your reference.

Miner Hashrate PSU Efficiency Daily (BTC) Breakevne($) Power Cost%
Whatsminer M66S (390T) 390T 7215W 18.5W/T 0.00031066 $33,443.64 54%
Whatsminer M60 (156T) 156T 3104W 19.9W/T 0.00012426 $35,971.03 58%
Whatsminer M63S (360T) 360T 6660W 18.5W/T 0.00028676 $33,443.99 54%
Whatsminer M53S++ 312T 6864W 22.0W/T 0.00024853 $39,770.49 65%
Antminer S21 Pro 234T 3510W 15.0W/T 0.00018639 $27,117.33 44%
Antminer T21 190T 3610W 19.0W/T 0.00015135 $34,346.88 56%
Avalon A1466I 170T 3315W 19.5W/T 0.00013541 $35,252.94 57%
Avalon A1466 150T 3230W 21.5W/T 0.00011948 $38,928.69 63%
Whatsminer M50S++ 140T 3080W 22.0W/T 0.00011152 $39,770.44 65%
Antminer S19k Pro 120T 2760W 23.0W/T 0.00009559 $41,577.57 67%
Avalon A1366 130T 3300W 25.4W/T 0.00010355 $45,890.87 74%
Whatsminer M50S 125T 3250W 26.0W/T 0.00009957 $47,002.11 76%
Antminer S19 Pro 110T 3250W 29.5W/T 0.00008762 $53,412.46 87%
Avalon A1346 110T 3300W 30.0W/T 0.00008762 $54,234.19 88%
Whatsminer M30S++ 112T 3472W 31.0W/T 0.00008921 $56,043.94 91%

New Opportunity provided by BTC Layer2

Miners have benefited significantly from Runes, particularly due to the impressive transaction fee activity that has been observed following the Bitcoin halving. Immediately after the halving event, the market experienced inflated hash prices, partly fueled by the transaction fees generated by Runes. Notably, after the halving at block 840,000, where the transaction fees totaled 37.63 BTC, Runes accounted for 36.75 BTC of these fees, skyrocketing the value of block 840,000 to an unprecedented $2.6 million.

In November 18, 2023, activity on the Bitcoin network significantly increased, primarily due to a surge in Ordinals, which led to a notable rise in Bitcoin transaction fees. This boost in network activity relates to the demand for block space, a fundamental aspect of the Bitcoin economic model. When a record-breaking $4.92 million in daily transaction fees was recorded, largely attributed to these inscriptions. The total fees from all inscriptions amounted to $98 million. This spike in fees not only reflects the growing interest and activity in Bitcoin inscriptions but also highlights the network’s capacity for innovation, interactivity, and monetization.

At the same time, BRC-20 tokens, especially tokens like ORDI, are also becoming increasingly popular. These tokens are listed on major cryptocurrency exchanges such as Binance, further drawing attention to these new digital assets. The continued interest in BRC-20 tokens further drives network activity, which can be visualized in the chart below. At the peak, over 97% of the inscriptions were attributed to BRC-20 mints.

By examining historical data, we can see that the increasing proportion of transaction fees has become an important component of miners’ income during the halving process. In a previous article, we introduced some new opportunities related to BTC Layer2.

Look Into Bitcoin Miner Revenue Fees

From the charts mentioned above, we can observe that during peak periods for transaction fees, the revenue from these fees has at times surpassed block rewards. Ideally, each halving event leads to an increase in transaction fees, ensuring that even as block rewards diminish to negligible levels, BTC mining can still yield significant profits.We anticipate that the robust development of BTC Layer2 will lay a solid foundation for increasing Bitcoin’s transaction volume.