Who is most hurt by the BTC block reward halving: individual miners

Bitcoin October 16th News: As the price of Bitcoin has once again fallen into a state of volatility, I believe many people in the cryptocurrency community want to know the answer to a question: When the next Bitcoin block reward is halved, can its price "Go To The Moon"?

Although it will take a little more time for Bitcoin prices to return to their all-time highs in 2017, this question has gradually surfaced as the block reward halving approaches (expected to occur in May 2020). Bitcoin has experienced two halvings in November 2012 and July 2016, and each halving was followed by a bull run. However, people still have different opinions on the possible impact of Bitcoin's block reward halving, and whether the upward trend of Bitcoin prices is really affected by the block halving has always been an open question.

If the next Bitcoin block reward halving can bring about a bull market, how strong will the upward trend of this bull market be? With this question, let's go to the World Digital Mining Summit held recently in Frankfurt, Germany, to see how Bitcoin mining machine manufacturing giant and mining pool operator Bitmain and other miners discussed it.

Price Effect

Bitmain co-founder and former CEO Jihan Wu does not seem to see the positive impact of the halving of block rewards on the rise in Bitcoin prices. He believes that the price increases in the previous two Bitcoin bull markets may have been due to catching up with the "bubble bursting cycle stage", nothing more.

Wu Jihan went on to point out that Litecoin’s price did not soar but plummeted after the block reward halving in August this year. Its price had soared from US$31 to US$135 in the first half of this year, but began to fall in July, about a month before the block reward regulation, and is now trading at around US$57.

Wu Jihan said:

“Maybe people did all sorts of big bookmaking before the Bitcoin block reward halving, and then even the good news couldn’t be a selling point to stimulate the price increase. Of course, maybe this bull run hasn’t happened yet.”

In fact, the impact of the Bitcoin block reward halving on its price and predicted returns are likely to increase as people have already started to pre-bet on price increases, Wu added:

“During the first and second Bitcoin block reward halvings, people didn’t really know what was going to happen. For example, during the second Bitcoin block reward halving, everyone was discussing whether to expand the capacity, which complicated things. But now? You see everyone is looking forward to the Bitcoin block reward halving.”

There are different opinions in the community about Wu Jihan's views. Matthew Roszak, chairman of blockchain software company Bloq, is one of them. He believes that the reason why Bitcoin prices can remain at a high level is mainly because the Bitcoin financial ecosystem is becoming more and more mature over time.

Matthew Roszak said that Fidelity, Bakkt, and many household names have begun to enter the cryptocurrency market, and Facebook's launch of the digital currency Libra has also attracted many people to pay attention to and participate in this emerging industry. He added:

“Institutional investor demand continues to intensify, crypto custody platforms, insurance, legal compliance, and regulatory regulations are all taking shape, which is very favorable for Bitcoin.”

Matthew Roszak predicts that the price of Bitcoin will fall between $15,000 and $100,000, and the halving of block rewards will bring Bitcoin an upward trend that has lasted more than a decade.

Do I need to replace the mining machine with a new one?

Regardless of who wins the final prediction on whether the Bitcoin block reward halving can stimulate the rise of Bitcoin prices, there is one group that will definitely be affected the most: miners. Because with the reduction of block rewards, at least in the short term, miners' profits will shrink, because the old version of the mining machine will no longer bring any profit to miners.

Marco Streng, CEO of Genesis Mining, said at the World Digital Mining Summit that the Bitmain Antminer S9, the most popular Bitcoin mining machine on the market, has now reached its productivity limit and many miners can no longer make money with this mining machine. In fact, the S9 and Canaan Creative's Avalon A851 series have similar computing power and are also the most widely used Bitcoin mining equipment on the market. According to the index of the mining pool f2pool, if calculated at the current price of Bitcoin, these older mining machine models have a mining profit margin of only 50%.

Some miners want to update their mining equipment as quickly as possible, but Wu Jihan does not seem to agree with this approach. He warned miners not to buy as many mining machines as possible:

“If I were an investor in mining equipment, I would be more conservative, but I will continue to invest.”

In September this year, Bitmain released the latest Antminer S17, and will release another version S17+ mining machine next.

How can miners remain profitable now?

Genesis Mining CEO Marco Streng added that less mining hardware in circulation would be good for the industry in the long run, saying:

“We are moving towards a real heavy industry, hoping to make the life of mining equipment longer. This is a very cruel thing, because most inefficient miners will be eliminated by the market, but at the same time, this will further promote innovation. Not only that, based on experience, many miners hope that the price of Bitcoin will rise, because then they will sell less and weaken the selling pressure in the market.”

According to Marco Streng, the biggest impact of the halving of Bitcoin’s block rewards is that small miners will be eliminated, and these miners currently account for about 20% of the market share.

Alexander Gavrik, co-founder of mining software company Uminers, said that as the major players in the mining market become more and more “dominant,” market volatility will become less and less. He said:

“The market is moving towards industrial mining and it’s not as fragmented as it was before, and there are obviously fewer enthusiasts in the Bitcoin mining market now.”

This article is translated from coindesk