The price of Bitcoin may experience a slowdown following the Bitcoin halving, which could have a negative impact on the stock prices of high-cost public miners in the United States. This could potentially lead to some miners relocating offshore.
Jaran Mellerud, founder and chief mining strategist of Hashlabs Mining, expressed concerns about the profitability of mining companies if the price of Bitcoin does not increase significantly after the halving. He is closely monitoring the three to four-month period following the halving to assess the impact on miner profitability due to the reduced block rewards.
The next Bitcoin halving is expected to take place on April 24, according to CoinMarketCap. This event will decrease Bitcoin miner rewards from 6.25 BTC ($321,000) to 3.125 BTC ($160,500), although historically it has been followed by a surge in the price of Bitcoin.
During the previous halving in May 2020, Bitcoin was priced at $8,750 and experienced a substantial increase of over 430% in the following five months, reaching $61,300 by mid-March 2021.
However, if Bitcoin does not experience a significant price surge within that three to four-month period, Mellerud warns that many miners may have to shut down their operations, especially those paying high hosting rates of $0.07 per kWh or more. He notes that a significant number of these inefficient miners are located in the United States.
As a result, Mellerud anticipates a shift in Bitcoin’s hash rate from the U.S. to countries with lower electricity costs, particularly in Africa and Latin America.
Concerns about profitability arose in late January when Cantor Fitzgerald reported that 11 publicly-listed Bitcoin miners would not be profitable after the halving if Bitcoin’s price remained around $40,000.
However, with Bitcoin’s current price at $51,000, only four out of the 13 mining firms fall below the profitability threshold.
Mitchell Askew, the head analyst at Bitcoin mining firm Blockware Solutions, disagrees with Mellerud’s argument that most inefficient miners are based in the U.S. He believes that they only make up a small portion of Bitcoin’s total hash rate, so any loss in hash rate in the U.S. would be insignificant.
Askew also mentions that even if miners become unprofitable, there are factors that would prevent them from moving offshore. Some miners are locked into fixed hosting contracts that require them to continue mining regardless of profitability. Additionally, some miners mine for the purpose of accumulating non-Know Your Customer Bitcoin and are less concerned with profitability.
Mellerud identifies Ethiopia, Nigeria, and Kenya as the African countries best positioned to attract a larger share of the hash rate in the event of a mining migration. He highlights Ethiopia in particular, citing its surplus of hydropower and the influx of Chinese miners moving there. He expects Ethiopia to capture 5-10% of Bitcoin’s total hash rate in the next few years.
In South America, Mellerud believes that Argentina and Paraguay are the most promising mining countries.
In conclusion, there is a possibility of a decline in Bitcoin’s price after the halving, which could negatively impact the stock prices of high-cost public miners in the United States. Some miners may be forced to move offshore as a result. However, there are differing opinions on the extent of this impact and the likelihood of miners relocating.