Halving will not have an immediate effect, miners may capitulate in the short term

After a brief spike to $10,600 on October 26, Bitcoin prices have re-entered a sharp downward trend. Many analysts predict that Bitcoin prices may fall further to around $5,000 to $6,000. Price declines increase the probability of so-called "miner capitulation," which in turn leads to further price declines, such as the sharp drop in Bitcoin prices in December 2018.
First, let’s talk about why miners surrender?
When mining is no longer profitable, miners' profits will decline, and miners will naturally sell their Bitcoins in response to the deterioration of market sentiment. Once miners start selling Bitcoin, it will generate huge selling pressure on the market, which will lead to further deterioration of the situation.
Large mining companies may not succumb to short-term price plunges because they have long-term contracts with electricity suppliers and more importantly, they have more capital to deal with market instability in the longer term. However, small mining companies are not like this and are likely to capitulate in the short term.
When short-term miners surrender, the market will mostly recover within half a year to a year, such as at the end of 2018. At present, it is too early to predict whether miners will surrender at the end of the year, but if negative sentiment continues in the market in the first quarter of 2020, the "capitulation event" of December 2018 may happen again in the next few months.
The break-even price for Bitcoin mining is estimated to be around $4,100 to $4,500, and according to Canadian mining giant Miner Hut8, the company’s mining costs for the entire third quarter of this year were about $4,300. The company said:

“Revenue was $26.7 million, margin was 58%, and adjusted EBITDA was $14.7 million. 1,965 bitcoins were mined at a cost of $4,363 per bitcoin, which includes electricity, mining pool fees, and other production costs.”

Crypto researcher Ceteris Paribus noted that the company’s calculated costs ignore depreciation, expenses, and net financial expenses, so the actual mining cost should be estimated at $7,100.

“In the short term, if the price is below $7,100, they will continue to mine because the overall price is greater than the company’s operating costs, and mining machines and other equipment are silent costs. However, when the price is below $5,000 for a long time, the company will be unprofitable because they need to replace equipment, pay employee salaries and other financial costs.”

It can be seen that although large mining companies hold a large amount of Bitcoin and cash reserves, they do not need to urgently reduce operating costs to cope with the risk of falling Bitcoin prices in a certain period of time, the decline in Bitcoin prices and the increase in mining difficulty will have a negative impact on the profits of the entire mining industry, causing losses to many miners and small mining companies, especially when Bitcoin falls to the price range of $6,000, which is already below the break-even point for most miners.
One of the most anticipated events in the crypto community in 2020 is Bitcoin’s block reward halving in May. This mechanism is triggered every four years and effectively cuts the rewards received by miners in half. It also reduces the rate at which new Bitcoins are generated as the network approaches a fixed supply of 21 million Bitcoins.
Since last year, the halving has been seen as a driving factor for the rise in Bitcoin prices. As a scarce resource, any event that reduces supply can theoretically affect its price trend, but the halving will not have a direct impact on the price of Bitcoin. If the halving does not have a positive impact on the price of Bitcoin, it will instead put more pressure on miners to adopt better infrastructure and more efficient equipment. Throughout history, it has not been until a year or two after the halving event that Bitcoin prices have rebounded significantly, perhaps because it was priced in before the event.
Therefore, due to the significant price drop since mid-2019, the capitulation of small miners may cause Bitcoin to attempt to find support at lower levels between 5,000 and 6,000, which will lead to negative sentiment in the cryptocurrency market in early 2020. For these reasons, even the upcoming Bitcoin halving in May 2020 may lead to short-term capitulation of small mining companies as its impact will not be immediate.

Source: Quantitative Kicking Horse River