How will the BTC reward halving affect miners and coin prices?

Source: Shallot

Editor’s Note: The original title was “More than $100 million in additional BTC supply in one year”

The Bitcoin network has been running faster than expected for much of this year, which has further led to a sharp increase in the number of Bitcoins issued.

1. Nearly 20,000 additional Bitcoins mined in the past year

According to the original speed of mining one block every ten minutes designed by Satoshi Nakamoto, about 144 blocks can be mined in a day.

However, according to Trustnodes, an average of 147.64 blocks were mined per day over the past year. This means that nearly 4 additional blocks were mined per day. Based on the current reward of 12.5 BTC per block, this is equivalent to an additional 50 bitcoins per day, for a total of approximately 18,250 bitcoins. At current prices, this is worth approximately $132 million.

According to BTC.com data, 53,889 blocks were actually mined in the past year, while 52,560 blocks should have been mined at the original mining rate, which means that nearly 1,500 blocks or nearly 20,000 bitcoins were mined in excess.

2. Factors that cause the Bitcoin network to run too fast

1. Bitcoin computing power maintains an upward trend

On November 8, the difficulty of Bitcoin mining dropped by 7.10% compared with the previous two weeks. In addition, according to Tokenview data, in terms of mining data, the average computing power of Bitcoin in the past seven days is 88.01 EH/s, and the average computing power in the past 24 hours is 78.7 EH/s. The computing power of the entire network has dropped significantly after reaching a high of 110 EH/s on November 23; the total number of blocks produced in the entire network yesterday was 122, 3 fewer than the previous day, and the average block production time was 708.2 seconds, 17 seconds more than the previous day, and the total transaction fee on the chain was 39.87 BTC.

But overall, Bitcoin computing power has maintained an upward trend, so the overall operating speed of the Bitcoin network has gradually accelerated.

Bitcoin hashrate in November 2019

With the recent sharp drop in Bitcoin prices, the volatility of hashrate is high. However, the price drop may also be due to the fact that inflation has been higher than expected. Although the additional mined Bitcoins account for only a small part of the total inflation rate, they have increased the supply by more than 100 million, and miners may have begun to sell Bitcoin instead of holding it.

2. Bitcoin Reward Halving Effect and Scarcity

As we all know, the Bitcoin reward halving will reduce the new supply by 50%, and scarcity is an important factor in Bitcoin's price.

Xiaocong's previous article pointed out that as of mid-to-late October, excluding bitcoins that can be proven to be lost or assumed to be lost (permanently lost), the actual circulating supply of Bitcoin is 16.3 million, leaving less than 3 million Bitcoins available for mining.

Naturally, miners wanting to frantically mine before the Bitcoin halving is a key factor in the Bitcoin network running faster than expected.

The latest data from Xiaocong shows that the Bitcoin halving is expected to take place on May 15 next year, which is less than 170 days away.

(Image source: bitcoinblockhalf)

3. How will Bitcoin halving affect miners and coin prices?

As for how the halving of Bitcoin mining rewards will affect the BTC price, Cobo founder Shenyu said in an interview recently that "Bitcoin halving is a fatal blow to existing miners, and their income has been directly reduced by half. If the price of the currency does not fluctuate drastically at this juncture, it may cause the mining machines that currently account for about 50% of the electricity costs to be unable to mine, because their marginal income is less than the marginal cost, and they can only choose to shut down. If the price of the currency does not rise sharply during the halving, the computing power of the entire network will drop sharply, and the payback period of the mining machine will become longer.

Dovey Wan, founding partner of Primitive Ventures, holds the same view. He pointed out that on November 8, the difficulty of Bitcoin mining dropped sharply for the first time in 2019, with a drop of about 7%. The price drop was mainly due to the closure of low-end mining machines, and partly due to the end of the rainy season, when cheaper surplus hydropower is no longer widely available. If the price of Bitcoin does not double when the halving occurs, many miners will face serious difficulties.

Xiaocong checked the latest data from F2pool and found that based on the current difficulty of Bitcoin mining, and with an electricity price of 0.38 yuan per kWh, four Bitcoin mining machines are at the shutdown price. Among them, the mainstream mining machine S9 is approaching the shutdown price. On November 25, the mainstream mining machine once fell below the shutdown price.

In addition, Bitmain founder Jihan Wu said in response to the halving of Bitcoin mining revenue that cryptocurrencies themselves are cyclical, just like Litecoin's halving, but Bitcoin's halving may be different from Litecoin's halving. BTC's bear and bull markets are prolonging each time, and it is possible that the bull market will not come when this halving occurs. I personally think there are still many uncertainties about the impact of future halvings. Jihan Wu believes that now is a good time to invest in mining. If I were a miner, I would not stop mining and would continue to invest in mining equipment. Jihan Wu said that we are currently in a short-term price correction. It is very important to have a long-term perspective. I am negative about the halving raising the price of the currency, but I am positive about the long-term price trend of Bitcoin. If the price of the currency remains unchanged after the halving, the efficiency of existing equipment must be improved, and there must be a trade-off between efficiency and computing power.