Bitcoin is seen in an illustrated photo taken at La Maison du Bitcoin in Paris, France on June 23, 2017.Reuters/Benoit Tessier/File photo Obtaining license rights
Nov. 14 (Reuters) – Bitcoin miners are making hay as the sun shines.
The business has been brought out of its doldrums by the recent rally in cryptocurrencies, with mining companies now scrambling to lock in profits ahead of Bitcoin’s “halving,” when the reward for creating tokens is cut in half. .
The next halving is scheduled for April 2024, a process aimed at slowing the issuance of Bitcoin, limiting its supply to 21 million coins, of which 19 million Already mined.
“There is a very urgent need to deploy rigs before the halving,” said Gregory Lewis, an analyst at BTIG, a brokerage firm that covers 13 major U.S.-listed bitcoin miners.
According to crypto platform Blockchain.com, Bitcoin’s hash rate – a measure of the computing power required to mine a coin – has soared to an all-time high. This means that miners have to use more and more power and speed to solve complex mathematical puzzles to earn Bitcoin.
JPMorgan analysts estimate that hashrate has been at record highs for 11 consecutive months, including a historic spike in October.
play the game
Bitcoin rose about 37% last month to around $37,000 after months of stagnation, but the recovery has helped miners connect powerful computers to solve puzzles and create newly minted coins. We are encouraging you to sell.
The average 30-day revenue earned by miners has steadily improved this year, reaching $32.46 million in 18 months as of November 11, according to data from blockchain.com.
But mining, a highly energy-intensive process, is still not as profitable as it was in its heyday in 2021.
According to mining data platform Hash Rate Index, the estimated income for a miner using 1 petahash of computing power per second per day has risen to more than $81 from $70 in early November, but remains at 5. This is well below the peak of $127 at the beginning of the month.
With six months left until miners’ reward shares are cut, miners are looking for ways to prevent margins from shrinking in a highly competitive environment.
“Every time you halve, the miners can’t play the game at a high enough level and they get weeded out,” said William Shamoshegui, CEO of mining company Sazmining.
Cut your chances in half
Historically, the price of Bitcoin has typically increased after a halving. Six months after the first halving in 2012, the price jumped from $12 to $126. After the second halving in 2016, it rose from $654 to $1,000 within seven months, and in 2020 it rose from $8,570 to $18,040 in the same period.
During Bitcoin’s third halving in 2020, miners’ rewards were reduced to 6.25 Bitcoin per block, and the next halving is expected to reduce it to 3.125 Bitcoin in April.
Mining each block at the current price would yield a profit of $231,250.
Matteo Greco, an analyst at digital asset investment firm Fineqia International (FNQ.CD), said many mining companies are upgrading equipment and increasing hashrate capabilities to stay competitive. Ta.
To maintain profit margins, some players have resorted to relocating operations to Central American countries where energy prices are more affordable and governments are friendly to cryptocurrencies.
“It is too early to tell whether all Bitcoin miners are extinct,” said Ludovic Thomas, portfolio manager at Kryptonite Asset Management, a Swiss-based digital asset investor. “Increasing profitability always leads to increasing hashrate and difficulty of the network.”
Reporting by Medha Singh and Lisa Matakkal in Bangalore Editing by Vidya Ranganathan and Pravin Chah
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