Bitcoin halving came and went. Did it meet the crypto market expectations? Sure as hell, no!! The Bitcoin price soared to the moon as promised. Are you joking? Of course, NO!! Who is left to suffer? BTC miners and the suffering is to no end. Why? These miners put in all they had to mine the blocs as designed by Satoshi Nakamoto. Some argue that BlackRock is the very entity holding the industry together.
Bitcoin miners suffer, and a big one
The recent halving event did not meet the expectations of many investors, as the price of Bitcoin experienced a 3.4% decline over the past seven days as of 2:30 p.m. ET. The industry narrowly avoided a more severe collapse thanks to a 4.7% recovery in the last 24 hours.
Based on data from S&P Global Market Intelligence, Riot Platforms experienced a decline of 13.8% over the course of the week. Marathon Digital also saw a decrease of 11.8%, while Cleanspark experienced a larger drop of 16.2%. At the time of writing, the stocks have experienced significant declines of 12.5%, 10.1%, and 15.2%, respectively.
This week’s major news included an inflation report that exceeded expectations and the Federal Reserve’s decision to maintain interest rates on Thursday. The Fed has expressed concerns about the possibility of inflation resurfacing. And with rates staying elevated, that could potentially dampen economic activity and limit the available funds for individuals to invest in non-essential or high-risk assets such as Bitcoin.
There is a decrease in optimism regarding the influence of exchange-traded funds (ETFs) on the Bitcoin market due to lackluster demand for launches in Hong Kong and a significant slowdown in U.S. fund flows.
Miners are bearing the brunt of this week’s move for a few reasons. Similar to a quantitative analyst, companies rely on BTC to generate revenue. Therefore, a rise in price is beneficial for business, while a fall in price leads to a decrease in revenue and margins.
Another significant factor is the presence of Bitcoin on these companies’ balance sheets, amplifying the effect. It can be quite advantageous when Bitcoin is on the rise, but it has a significant impact when it experiences a drop.
Following the halving event, the decrease in the mining reward for Bitcoin has prompted speculation among investors about a potential surge in the price. However, Bitcoin miners may experience margin pressure if that scenario fails to materialize.
Understanding BTC mining – Where do miners go from here
Historical data indicates that in bullish market conditions, BTC miners consistently generate higher returns compared to the crypto itself. However, in recent months, Bitcoin miners have faced significant challenges due to the increasing popularity of spot Bitcoin ETFs among investors.
Adding to the challenge, BTC recently experienced its fourth halving, which reduced the block reward given to miners by half, significantly impacting their primary income stream.
Miners are currently grappling with the daunting task of staying afloat and maintaining their stock prices, unless there is a substantial price surge. Investing in this industry can be quite challenging, as history has demonstrated that halving typically occurs before significant increases in BTC’s price, often causing mining stocks to rise as well.
It will be important to monitor in the future whether these companies can generate profits with only half of the Bitcoin reward. Expect an increase in costs, which will likely result in a decrease in margins. However, a potential positive scenario suggests that the remaining players in the market could potentially gain a larger market share and experience advantages from the upward trend in Bitcoin prices.
If BTC fails to increase in value in the near future, there is a concern that miners will face more challenges in the financial landscape. They will experience an additional financial burden due to the rising electricity costs and the impact of BTC’s price and the halving.
