Bitcoin Halving Event to Cut Miner Rewards in Half

The next Bitcoin halving, estimated to occur on April 20, 2024, will reduce the miner reward from 6.25 BTC to 3.125 BTC, significantly impacting the circulation of new Bitcoins. This event is anticipated to influence Bitcoin's price due to increased scarcity and the potential relocation of older mining computers overseas to reduce operating costs, particularly in regions with lower electricity prices.

Bitcoin Halving Event to Cut Miner Rewards in Half

The next Bitcoin halving event is anticipated to occur on or around April 20, 2024. These halving events typically occur approximately every four years, although the precise date may fluctuate slightly due to minor variations in block creation times on the Bitcoin network. Bitcoin halvings hold significant implications as they directly affect the rate at which new Bitcoins enter circulation.

During the upcoming halving, the reward that miners receive for successfully validating transactions and adding blocks to the Bitcoin blockchain will be reduced by half, from the current 6.25 BTC to 3.125 BTC. This mechanism is inherently programmed into Bitcoin's protocol to enforce its finite supply, with a maximum of 21 million Bitcoins ever to be created.

Halvings have the potential to influence Bitcoin's price due to increased scarcity. As the difficulty of acquiring new Bitcoins increases, the existing supply becomes proportionally more scarce. If demand for Bitcoin remains steady or grows, this heightened scarcity could exert upward pressure on its price. Additionally, halvings contribute to the long-term security of the Bitcoin network by maintaining the profitability of the mining process. This sustained incentive encourages miners to dedicate their resources, thereby safeguarding Bitcoin's integrity and security.

Bloomberg reported on February 27, 2024, that as the next Bitcoin halving approaches, numerous older mining computers in the United States are slated for decommissioning and subsequent resale and relocation overseas. SunnySide Digital, a Colorado-based wholesaler, is preparing its facility to refurbish and export these machines to regions with significantly lower electricity costs. With electricity constituting the primary expense for miners, publicly traded giants such as Marathon Digital Holdings (NASDAQ: MARA) and Riot Platforms (NASDAQ: RIOT) face pressure to maximize efficiency to maintain profitability. Older machines may simply be unable to generate sufficient Bitcoin revenue to justify operating expenses in the United States. Taras Kulyk, CEO of SunnySide Digital, disclosed that they have sold machines to buyers in Ethiopia, Tanzania, Paraguay, and Uruguay. Luxor Technology estimates that approximately 600,000 S19 series machines, a widely utilized model, are being relocated overseas.

In February 2024, Forbes reported that the Ethiopian Investment Holdings (EIH), the government's investment arm, had signed a $250 million agreement with West Data Group's Center Service PLC, a Hong Kong-based entity. This partnership aims to establish cutting-edge infrastructure dedicated to Bitcoin mining and artificial intelligence. This landmark deal, as noted by Kal Kassa, CEO for Ethiopia at Hashlabs Mining, aligns with Ethiopia's broader strategy to foster economic development through technology and attract foreign investment. With the African data center market projected to reach $5.4 billion by 2027, according to Aritzon Advisory and Intelligence, Ethiopia is positioning itself for substantial leadership in this sector.

Bloomberg explains that miners often opt to export their older machines due to the allure of substantially lower energy prices. This potential cost reduction becomes even more critical in light of Bitcoin's halving, which could render less efficient machines unprofitable to operate in the United States. Ethan Vera of Luxor Technology believes that buyers are strategically seeking the most affordable electricity available.

Bloomberg notes that not all US-based miners are selling their older machines. Some, such as Nuo Xu, choose to physically relocate to regions with lower costs. Xu intends to explore options in Ethiopia, Nigeria, and other countries, hoping to reduce operating expenses, including labor and building materials. Jaran Mellerud, CEO of Hashlabs Mining, echoes this sentiment, emphasizing Ethiopia's competitive hosting fees and growing appeal to miners due to relaxed regulations.

Bloomberg acknowledges potential risks for US miners operating overseas, including machine damage during transport, security concerns, and the complexities of international logistics. Publicly traded companies also face heightened scrutiny from shareholders, making relocation more complex. Sam Tabar, CEO of Bit Digital Inc., exemplifies this by revealing their practice of keeping older machines in storage in case rising Bitcoin prices make them temporarily profitable again.

Despite these challenges, the pre-halving upgrade cycle is well underway. Bloomberg highlights that Bitcoin miners have been preparing for years. The 13 largest public mining companies have reportedly invested over $1 billion in new machines since February 2023.