For Crypto Miners, Bitcoin's Halving Could Mean a Doubling in Costs

Published on by Coindesk | Published on

Bitcoin investors speculate the upcoming halving could send prices skyrocketing to $90,000 or higher.

To the operators of high-speed computers used to mine for bitcoin, the halving looks more like a doubling - of costs.

In a new report, the crypto-focused research firm TradeBlock estimates the average cost to mine a single bitcoin could jump to $12,525 after the halving, expected in May. That's nearly double the average cost of $6,851 now.

Essentially, miners will have to run twice the number of computations, with a corresponding increase in electricity usage, to get the same amount of bitcoin they're getting now.

What's happening now is a lesson on the emerging economics of bitcoin's commodity-like market cycles: Crypto mining companies are scrambling to get ready for the halving by upgrading their fleets of computers to include next-generation processor chips that are faster and more energy-efficient.

Researchers at the U.S. bank JPMorgan Chase have described bitcoin miners' average cost as the cryptocurrency's "Intrinsic value." Think of it like oil drillers' cost to pump an incremental barrel: If a drop in the market price renders oil unprofitable, many drillers will shut off the tap until prices rise again.

Some crypto-industry executives say it's more likely many of the older-generation mining computers or "Rigs" will become uneconomical after the halving, leaving faster machines to dominate the network.

Whatever the case, the threshold bears monitoring closely for bitcoin investors, says John Todaro, TradeBlock's director of digital currency research.

"It's very helpful to know what the miners are thinking, what the miners are doing," Todaro said in a phone interview.

"There might be some miners that are profitable at those levels, but not a lot of miners are going to be operating at a loss, and they might take their rigs offline."