Concerns over Miner Losses Post-Bitcoin Halving
Fidelity Digital Assets has raised concerns about potential losses for some miners if the Bitcoin price remains under $80,000 following the upcoming halving in April. In the company’s recently released 2024 market outlook, the focus was on the remarkable growth Bitcoin has experienced thus far, the current state of miners, and the possible future scenarios.
Bullish sentiments have been gaining momentum, especially with the increasing adoption of Bitcoin in Latin America and the approval of spot Bitcoin ETFs by the US SEC. However, analysts at Fidelity caution that miners could face losses if the Bitcoin price fails to surpass $80,000. The forthcoming halving in April will see block rewards cut in half, leading to a decrease in revenues. Despite this, historical patterns suggest that the asset’s price typically rises post-halving to offset these losses.
Impact of Institutional Inflows and Bitcoin Ordinals on Mining Profitability
In a notable shift, institutional investments surged in Q2 2023 following the anticipation of a spot BTC ETF approval, resulting in price upswings. Miners, who had previously experienced challenges, managed to return to profitability and are now preparing for the reduced rewards post-halving. With current prices exceeding $45,000, miner revenues have risen by an average of $10 million to $40 million. However, to sustain these profits, Bitcoin’s price must reach $80,000 to alleviate selling pressures.
Fidelity highlights that while the approval of spot Bitcoin has spurred optimism, other factors come into play for miners, such as the emergence of Bitcoin Ordinals. Despite initial skepticism, Ordinals have created an additional revenue stream, aiding miners in their recovery efforts. Looking ahead to 2024, Fidelity predicts a growing interest in Ordinals that will enhance miner fees. Analysts also emphasize the positive impact of Ordinals on the network, even with concerns about potential blockchain congestion affecting transaction fees.
