The post-halving Bitcoin mining market paradigm may shift towards further consolidation

The Bitcoin mining industry has undergone a significant transformation since the early days when anyone with dedicated software on their PC could participate. Many factors and contexts have changed, as the general trend has shifted towards an institutional approach, with larger players dominating the mining landscape amid dramatically increased competition for mining the next block.

Looking at the Bitcoin difficulty chart, it is evident that successfully mining a block has never been more challenging. The 2024 Bitcoin halving in April, which reduced the block reward to 3.125 BTC, has raised additional concerns about many mining businesses remaining profitable. This is especially true for miners using outdated equipment or lacking access to discounted electricity resources, as Bitcoin mining is highly energy-intensive. As a result, the most affected sector has been private or individual mining, which had already been struggling to cope with the growing pressure from the industry’s larger players.

The turbulence faced by the mining industry does not affect all parties involved in the same way. Larger companies operating massive infrastructures have already formed secure winning strategies, preparing themselves for upcoming changes and potential risks in advance, confirms GoMining CEO Mark Zalan.

The lack of potential for mining expenses optimization has become a critical survival factor amidst Bitcoin market prices, which did not skyrocket immediately after the halving as many expected. The decreased block reward results in lesser gains, while maintenance and electricity expenses remain at the same level. Looking back at previous Bitcoin cycles, this margin drawdown was eventually balanced with BTC price growth, which increased the value of the smaller Bitcoin amounts mined. According to Zalan, this time the situation is expected to follow a similar pattern.

“Certainly, mining has been a very profitable space and will continue to be so. As Bitcoin continues to increase in value, mining economics will readjust accordingly. Previous halving events catalyzed major growth cycles, and we don’t see indications that this cycle will play out differently,” says Mark Zalan.

Although these changes have already started the restructuring of the mining market, with some players already finding themselves eliminated, the ongoing situation will likely not significantly reduce competition. As the majority of the hashrate volume is generated by large-scale pools and mining companies with substantial technical and financial resources, it is unlikely we will see a noticeable decrease in the total hashrate.

The larger mining businesses are committed to long-term planning, addressing potential market transformations caused by the halving in advance. They achieve this by selecting optimal infrastructure locations, securing long-term electricity contracts, and continuously upgrading their mining fleets. Additionally, many miners are expected to hold their Bitcoins mined before and immediately after the halving until subsequent price changes make selling more attractive.

“We don’t think it makes sense to try to predict short-term market movements. We are certain that Bitcoin will continue to grow in value and utility, and we are focused on positioning ourselves and enabling our customers to take advantage of that growth,” concludes Zalan.

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