Miner behavior suggests Bitcoin price will top $15,000 post halving


The cost of mining Bitcoin will rise to $12,000 to $15,000 following the halving. What does it mean for the price?

Blockchain analytics firm Tradeblock produced the estimates in a new report that also says the decision by commercial operators to continue to throw more resources into mining shows they expect the price to top that level post halving.

Of course, if it doesn’t, then a lot of miners will go to the wall and the hash rate will drop substantially as many have already predicted.

The Litecoin hash rate plummeted 70% following the LTC halving last year. However, due to demand and Bitcoin’s other strengths, a similar drop is unlikely.

The higher $15,000 estimate is based on the hash rate continuing to increase and on commercial mining operators transitioning 30% of their mining rigs over to Bitmain’s highly efficient s17+ after it is released in March.

However if the hash rate stays flat and less money is spent on new equipment the breakeven costs is likely to be $12,525.

Some are likely to quibble with the report’s assumption that electricity costs are 6 cents per kilowatt hour, which is higher than the 2 cents an hour some big miners claim to be able to get through favorable wholesale purchasing agreements.

The halving is in 85 days

The halving occurs once every four years and reduces the block reward that miners receive by 50%.

The next halving is due to occur in 85 days in mid May at block height 630,000.

Currently 144 blocks are mined on average per day, with miners receiving 12.5 Bitcoin for each block. This results in a supply of 1800 new Bitcoins being each day.

Tradeblock said that commercial mining operators have been operating at a healthy profit this year even as the network hash rate continued to make new highs each week.

It currently costs $6851 to mine a Bitcoin.

Researchers from JPMorgan have described this cost as Bitcoin’s “intrinsic value”.

Rising hash rate needs rising price

The report notes the rising hash rate – which essentially measures how many resources are being devoted to mining – requires an increasing price to be sustainable.

“As resources dedicated to mining rise over time, efficiency gains and/or mining costs rise. As such, in order to maintain healthy profit margins for miners, a rising hash rate is typically needed to correspond with a rising bitcoin price,” the report noted.

Tradeblock concluded:

“Our estimated breakeven costs indicate that miners are continuing to increase resources towards the network despite what is set to become a cost (per mined btc) increase following the halving.

“This suggests that miners are likely expecting the price of bitcoin to rise to higher levels (above ~$12,000-15,000 per BTC) around the halving allowing them to continue to generate a profit, or they likely will look to reduce resources following the halving resulting in a hash rate decline as profitability falls.”

The CEO RRMine Bitcoin cloud mining platform Steve Tsou summed it up in January saying the halving will have “great impacts” on miners and that those “with low mining efficiency will be forced to pause and re-evaluate their business operations.”

While many believe the halving will push prices up to $100,000 based on the stock to flow model, an analysis of 32 halving events casts doubt on the theory.

Andrew Fenton

Contact: andrew@micky.com.au Andrew Fenton is an Australian freelance journalist and editor. He’s been a national entertainment writer for News Corp, film journalist for The Advertiser and a staff writer on SA Weekend and The Melbourne Weekly. Andrew's work has appeared pretty much everywhere including CNN International, news.com.au, Herald Sun, Daily Telegraph & Courier Mail, Triple J, 3AW, Rendezview, Adventure.com and Intrepid's The Journal. DISCLOSURE: Andrew's cryptocurrency holdings include BTC, VET, ETH, SNX TRAC, ZEN, XRP, WTC, and TRX.

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