The Bitcoin halving the
technical event sounds simple Bitcoin miners get paid in
Bitcoin to validate transactions and every four years, that
reward is halved. But the event is a big deal. Historically, the
halvings cut to supplies led to huge rallies for Bitcoin. Just
look at this price chart of Bitcoin from its first
transaction in 2009. Each halving event has set the stage
for a brand new bull run new all time highs and new Bitcoin
investors entering the market. This time, things look a lot
different for the world's largest cryptocurrency, crypto
worlds to name McKeel explains why 2024 is Bitcoin having is
getting a lot of attention. The technical event that cuts the
reward paid out to miners happens roughly every four
years. In the past it was only celebrated by a few of the
cryptocurrencies biggest cheerleaders this year, though,
that having is a hot topic sometime in the next 1218
months, you know, Bitcoin can be over 150,000 around the havening
where the the amount of bitcoin coming to market is cut in half
after that time period, you see another year of a bull market
and the reason for all the attention there are way more
people who care about and invest in Bitcoin than there were in
2020 during the last halving, that's thanks to a wave of
adoption during the last cycle and new investment options for
crypto curious investors like spot ETFs this was the defining
moment I think of Bitcoin, at least right in, in this era of
its history like this was its kind of IPO like moment,
Pandora's box is now open for institutional adoption of the
asset classes. Investors are excited because the halving has
historically set the stage for bitcoins next bull cycle, the
event cuts the number of new Bitcoin entering the network
each day, and that means tighter supply. Bitcoin now has a clear
demand on a very scarce asset, and that asset is about to get
even more scarce with Bitcoin. That added scarcity, often
kickstarts bitcoins rally to new all time highs, looking back at
the 2012 2016 and 2020 halvings. Bitcoins price ran up about 93
times, 30 times and eight times respectively, from its having a
price to its cycle top. Of course, past performance isn't
indicative of future results. And the market is very different
this time around huge maturation of the asset class
infrastructure development, more people than ever being
interested in it. Investors are hoping that this halving event
will also lead to big gains. But other things that those golden
days of the having supercharging the market might be behind us.
Julio Moreno of crypto quant called the having a one
significant event. So with all the hype and debate, what should
you expect for bitcoins price in the near term, so immediately
after, if we're going to define that as like 24 hours, 48 hours
a week, like really short term, I don't expect you're going to
see much at all, it's not a short term phenomenon. This is a
$30 million a day reduction in sell pressure, that effect
builds over time. So while that will have an effect on the
market, one day, two days, three days, four days after, I don't
think you're going to see a whole lot. And in the long term.
Well, if you noticed earlier, each having event has provided
diminishing returns 2012 saw a bigger rally than 2016, and so
on. There are also more ways than ever for investors to push
bitcoins price higher, I'll come out and say I am a skeptic on
the fact that the diminishing returns will happen this year. I
think this year we see a greater return than last cycle. Because
you know what, ultimately, what drives an asset price up any
asset price is not financial models, it's not cash flows,
it's people hitting the buy button in their brokerage
account. I think it's a little bit of a self fulfilling
prophecy where certainly, you know, a reduction in issuance of
bitcoin does help the price by making it more scarce. But a
large part of it is also just bringing it back into headlines
having it be top of mind, you know, in practice, the ETF flows
are substantially larger than any sort of increased issuance
in Bitcoin for Bitcoin miners. So I think it's not a more of a
material change and more of just a change in perception of the
asset. Now, while this event may have a
big effect on price, the most direct impact is on the Bitcoin
miners there are more than a dozen publicly traded miners on
the network, and 1000s of smaller private ones around the
globe, constantly racing to process transactions and get
paid in new Bitcoin. Because the event leads to a cut to rewards
paid to miners directly, they'll be the first ones to feel the
impact of the habit. Crypto world's Talia Kaplan explains
how some of the largest publicly traded miners have expanded
their businesses to prepare for this cut their revenue. Bitcoin
miners are preparing for the network's biggest event in four
years. We have a halving coming up here, and Riot has a number
of ambitious growth plans that we're scaling up our business
with so as the price of Bitcoin appreciates, we should
appreciate she'd from that in an outsized
way. The rally in Bitcoin really is what's keeping miners in
business today. When you think about post having the average
cost of mining bitcoin is somewhere around between
20 $25,000 a Bitcoin currently posts the halving, that'll go to
somewhere between 37 $45,000 a Bitcoin maybe $50,000 a Bitcoin
in some cases, for some miners, and with the bitcoin price being
at 6768 70,000 means that miners are still mining profitably,
though, what it really means is the miners with large scale will
be able to mined profitably, the smaller miners will be put under
more pressure, I think that we will see failures in the space.
You know, we already saw it in the last market, there were a
couple of bankruptcies both in the public and the private
space. I think we're gonna see that again. So I think that
there's gonna be great opportunity on an m&a basis,
we're thinking about the facilities are the data centers
that miners are operating in. If there's a data center full of
old equipment that is no longer efficient, we'd love to buy the
facility and move in. So what exactly is the Bitcoin having
miners on the network get paid in Bitcoin for verifying
transactions, and every four years, the supply of new Bitcoin
created to reward miners gets cut in half. This process is
hard coded into the Bitcoin protocol itself, meaning no one
can change it. This process takes place every 210,000
blocks. A block is a collection of verify transactions grouped
together, with blocks being validated roughly every 10
minutes. That works out to about every four years. Now the
halving affects the rate at which new Bitcoins are brought
into circulation, the supply of Bitcoin is finite, only 21
million will ever exist. Cutting mining rewards means fewer
Bitcoin will enter the market every day, that makes Bitcoin
more scarce after each having Bitcoin prices have historically
risen after past having events. So for investors, it could mean
big returns for miners, it could mean big losses, if they don't
find ways to become more efficient. Some miners could
even go out of business, if you think about the Bitcoin rewards
is you know, the pie got smaller, and all the miners that
exist, it's about the size of that pie. We think that there
will be miners that are less efficient and can't handle that
revenue shock. So we think as many as 30%, or you know, 15 to
30% of miners will actually have to turn off, shut down. I think
if you look globally, potentially about 15% of the
capacity may come under pressure. And by that I mean
that those operations may be unprofitable. And so those
miners that have machines that are above the global average in
energy consumption will likely come under pressure. So we'll
have to see but I think most of the publicly traded miners are
fairly well positioned at this point. The first halving event
took place in 2012. Four years after the first block was mined
on the network jumped to the most recent having 12 and a half
new bitcoins were added to the network at the beginning of
2020. In May, that number was cut in half to six and a
quarter. Its latest halving will drop awards to around 3.1 to
five, and that process will continue until all 21 million
coins have been mined. The expectation is that should
happen in about 116 years from now, right is positioned to exit
2024 mining more Bitcoin per day than it is right now. Despite
the halving occurring, we are scaling up our operations by
almost a factor of three. And we are implementing an ongoing
power strategy that helps decrease our energy costs and
gives us an industry leading of cost of production. Our direct
cost per Bitcoin in 2023 was just about 7500 A coin. Now that
increases with the halving, but with the price appreciating at a
faster rate, we think we are in a very good spot alongside
everything we're executing on this year, miners are expanding
their footprint to boost their capacity in an effort to limit
their losses post having riot acquired more than 31,000 mining
machines in February, that's a month clean spark announced it
completed the acquisition of three Bitcoin mining data
centers in Mississippi, which boosted the company's operating
hash rate. Earlier this month, Marathon digital closed a
previously announced acquisition of a 200 megawatt Bitcoin mining
data center in Texas. The benefit of owning and operating
these sites is that it essentially lowers our cost
operating and lowers our cost of my bitcoin, because we're now
taking out the middleman if you would. The other thing that's
been a very positive impact of this, we've been able to acquire
these sites at lower than replacement cost, meaning a cost
below what it would have cost us to build them in the first
place. So this is a great way of kind of being able to expand
quickly leverage other people's capital, they build the sites
and then we come in when the market gets a little weaker for
sites and acquire the sites and it's been a very good strategy
for us so far, but we'll continue to acquire sites and
our objective is to be predominantly owned and operated
going forward. You need to be efficient in order to survive
and Bitcoin and Bitcoin mining is no
different to any other industry. Phil Harvey is the founder and
CEO of Sabre five, six, a hosting provider and crypto
mining consultant. He expects to see consolidation among miners
following the upcoming halving. Now we're seeing in the in the
space a lot of mergers and acquisitions taking place
because the power just isn't there for people to grow into.
So those underlying assets the power purchase agreements PPAs
are becoming extremely lucrative. So yes, there will be
miners that don't have the capital in order to reinvest and
therefore provided they have lucrative underlying power asset
will become an m&a Target
