The halving of Bitcoin might result in a $10 billion revenue cut for miners, which could lead to increasing selling pressure due to liquidity issues.
TakeAway Points:
- Due to a halving event that affects Marathon Digital, Riot Platforms, and Cypher Mining and reduces earnings by $10 billion annually, bitcoin miners are under more pressure to sell.
- Even with a brief bump from memecoin transaction fees following the halving, overall miner revenue is declining, which might have an effect on the market as liquidity evaporates.
- Despite a 15% decline in the price of Bitcoin from its peak, major mining firms like Riot and Marathon have substantial holdings of the cryptocurrency worth over $1.6 billion combined.
Miners Deal with Revenue Issues
Due to a steep fall in revenue, Bitcoin miners who retain considerable amounts of the digital asset are preparing the market for increased selling pressure.
The recent halving of the Bitcoin code, which reduced the mining subsidy from 900 tokens to 450 tokens per day, is blamed for this decline. Crypto-mining businesses such as Cypher Mining, Riot Platforms, and Marathon Digital have lost an estimated $10 billion in revenue annually as a result of this modification, which is the fourth of its sort since 2012.
While the introduction of memecoins on Bitcoin caused a spike in transaction costs, which momentarily offset this loss, these fees have now fallen due to the following decrease in memecoin activity.
Issues with Liquidity During the Summer Slowdown
Kaiko, a research company, has expressed concerns about possible market effects should miners be forced to liquidate some of their holdings in the upcoming months.
The report, which was made public on Monday, highlights the customary summertime slowdown in trading activity and liquidity, raising the possibility that any forced sales by miners would intensify market pressures.
“If miners were forced to sell even a fraction of their holdings over the coming month, this would have a negative impact on markets. Trading activity typically slows down and liquidity dries up over the summer months.” Kaiko stated.
Because of a recovery in the market for digital assets, miners have been holding more of their assets, even if they sold most of them during the previous crypto crash in 2022. Notably, two of the biggest publicly traded Bitcoin mining firms, Riot and Marathon, now own 17,631 and 8,872 Bitcoin, respectively, worth little more than $500 million and just over $1.1 billion.
Mining Market Share and Difficulty
The mining difficulty of Bitcoin has decreased by 6%, which is a noteworthy milestone for miners since it is the biggest decrease since the December 2022 crypto winter. For miners like Riot Platforms (RIOT) and CleanSpark (CLSK), which are renowned for their low production costs and solid financial positions, this decline is viewed favourably.
Because of the decrease in mining difficulty and the effect of cost halving on operating expenses, more expensive mining equipment has been shut down, which has decreased the hashrate of the network as a whole. According to analysts Gautam Chhugani and Mahika Sapra of broker Bernstein, this dynamic has allowed certain miners to practically double their market share after halving.
