On February 7, the blockchain analytics provider Tradeblock published a report about the upcoming BTC reward halving. BTC’s block reward is expected to halve on or around May 12, 2020, and Tradeblock’s report estimates that the cost to mine BTC will be over $12,500 after the halving.
BTC’s Price Must Rise According to Post-Halving Cost Estimate
The great reward halving of 2020 is coming and the discussion about this topic has intrigued crypto supporters. BTC, the largest blockchain network by market capitalization, will see a reward halving on or around May 12, 2020.
This means a miner who finds a block on the network will only get 6.25 BTC, in comparison to today’s 12.5 BTC reward. Of course, the BTC reward halving has prompted intense speculation on whether the price will rise prior to the halving and remain profitable to mine after the event as well. Across social media platforms and crypto-focused forums, individuals have been debating the subject regularly. Additionally, there’s been various studies done on the subject and Tradeblock recently published the firm’s thoughts on the upcoming BTC reward halving and estimated post-halving cost.
Figure 1 from Tradeblock’s report shows BTC’s network hashrate and difficulty hit new all-time highs.
The blockchain analytics provider emphasized that the post-halving cost should be around $12,525. “In our latest estimates, we projected that commercial mining operators were likely operating at healthy profit margins as the price of bitcoin increased throughout 2019 (albeit with bouts of volatility over the year),” Tradeblock’s researchers noted. “However, the network hash rate has continued on a record run, making new highs nearly each week.” They added:
Hash rate increases as the number of resources, in aggregate, committed to securing the network through mining activities rises. 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.
Tradeblock’s generated assumptions for cost calculations.
Analysts and Controversial Stock-to-Flow Charts Show the Halving Could Propel BTC’s Price to $100K
Tradeblock stressed that the gross cost to mine a single BTC after the halving would need to be around $15,062 per coin. However, by adjusting the assumption that hashrate remains relatively flat then the cost would drop to $12,525 per BTC. “It is important to note, however, that large scale commercial mining pools such as those operated by Bitmain will likely have a lower device price point as they will be utilizing Antminer devices at cost,” Tradeblock’s report highlights. “As such, this would allow breakeven costs to be somewhat lower than the above estimates.”
The Tradeblock report follows the report published in September by Bayerische Landesbank (Bavarian State Bank), which estimated BTC prices could touch $90,000 soon. The report’s estimates and reasoning derive from speculation concerning the reward halving and the controversial stock-to-flow (S2F) system. News.Bitcoin.com recently reported on how a few S2F charts show a possible climb to the $100K mark. Traders who wholeheartedly believe in S2F technical analysis think that the reward halving is one of the biggest reasons why the $100K price is achievable. Additionally, onchain data indicates that BTC miners are hoarding coins as the difference between freshly generated coins and their first spends have consistent gaps week after week.
Statistics from Bytetree’s “Generation / On-chain 1st Spend” data shows lots of miners are hoarding coins prior to the halving.
Tradeblock’s report assumes miners will continue to expend resources in order to secure the network despite the reward halving. The study’s data suggests that the “cost (per mined btc) increase following the halving” will surely happen, but the rise in price is theoretical. “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,” Tradeblock’s report concludes. If the price of bitcoin means it is not profitable to mine after the BTC halving in May, significant miner capitulation could occur.
What do you think about the BTC reward halving? Do you think the price is already priced in or do you expect BTC to rise just before the halving? Let us know what you think about this subject in the comments section below.
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