Bitcoin’s quadrennial halving is fast approaching – it’s scheduled for April 20. It’s stoking speculation about whether the largest cryptocurrency will perform comparably to prior halvings.
One of the primary factors in bitcoin halvings is that miners’ hashrate declines. That limits the new supply of the digital currency coming to market. Following the prior three halvings, the hashrate sank by 25%, 11%, and 25%, respectively. The specter of a similar drop this year is seen as a potential drag on miners. That includes some residing in the Amplify Transformational Data Sharing ETF (BLOK).
On the other hand, some crypto experts believe this time will be different. Those experts think that while the hashrate will fall immediately after the halving, it could rebound. And that could provide surprising support to some BLOK holdings when some are reaping big profits.
Halving Might Not Hit BLOK Miners
In a recent op-ed for CoinDesk, Jaran Mellerud of Hashlabs Mining noted the upcoming halving could bring a hashrate decline of 5%-10%. Other experts forecast a drop of 3%-7%. In either circumstance, those drops are more favorable than historical precedent. That potentially indicates the halving won’t pinch BLOK miners as much as expected.
“This cautious forecast stems from the present high profitability of Bitcoin mining, driven by its high price, and the observation that approximately 70% of Bitcoin’s hashrate was introduced since January 2022, operating under mining economics that at times were less favorable than those now anticipated post-halving,” wrote Mellerud.
He added that another effect of the upcoming halving is that the event is likely to compel crypto miners currently grappling with high costs to improve that situation. Some miners need costs of five cents per kilowatt hour to be profitable, but are dealing with eight cents per kilowatt hour in advance of the halving. That implies miners could need to upgrade equipment following the halving in an effort to become more cost effective.
Beyond mining crypto, miners — including some BLOK holdings — have an underappreciated, longer-ranging tailwind: diversification, as in diversifying revenue streams beyond cryptocurrency mining. That’s a potentially smooth transition for some miners. That’s because they’re already steeped in capabilities needed to power innovative technologies such as artificial intelligence (AI) and supercomputing.
“The fierce competitiveness that defines the current state of the mining industry is prompting many, especially public miners, to explore new horizons. Increasingly, there’s a move towards AI computing, with companies like Iren and Hive Digital Technologies leading the charge,” concluded Mellerud.
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