Bitcoin Miners Need to Be Proactive to Hold Their Positions After Halving: Fidelity Digital Assets

As the protocol evolves, new layers could emerge bringing new use cases and more users, the report said.

AccessTimeIconMar 5, 2024 at 8:49 a.m. UTC
Updated Mar 8, 2024 at 10:37 p.m. UTC
  • Miners will need to maintain their existing hashrate, energy and real estate while competing with the rest of the network.
  • The months after halving are the most difficult.
  • The mining sector recovered after previous halvings, demonstrating the resilience of the network and the industry.

Bitcoin (BTC) holders have historically welcomed the quadrennial reward halving in the expectation it will drive prices higher, but miners must constantly plan for this event – which cuts their bitcoin earned by 50% – to avoid going bankrupt, Fidelity Digital Assets said in a report Monday.

“Not only do miners need to maintain their existing hash rate, energy and real estate, but they are also continuously competing with the entire network that is trying to do the same thing,” analyst Daniel Gray wrote.

Hashrate refers to the total combined computational power that is being used to mine and process transactions on a proof-of-work blockchain, such as Bitcoin. Miners need to be proactive and cannot afford to just maintain their position in the network, the report said.

“They must constantly push to acquire more hashrate as well as increase the efficiency of their hashrate, acquire lower-cost energy from cheaper sources, and expand their infrastructure to house any new machines,” Gray wrote. At the same time, every other miner is also bidding for the same resources.

Fidelity notes that the months after halving are the most difficult, because while bitcoin “plays catch-up to the immediate pay cut,” miners need capital reserves to offset the drop in revenue.

Still, as the protocol evolves, new layers could emerge bringing new use cases and more users, the note said.

“While the past halvings did see a flush-out of weaker miners, the industry ultimately recovered with more miners and hashrate than ever, demonstrating the resiliency of the network and industry,” the report added.

Edited by Sheldon Reback.


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