Bitcoin miners are bracing themselves for a significant blow worth over $10 billion as the highly anticipated halving event draws near, according to a recent report by Bloomberg. With the halving set to take place in less than five days, the immediate reward for mining new blocks will be reduced from 6.25 BTC to just 3.125 BTC per block.
The impact of the halving is expected to be particularly severe for mining companies with higher-than-average operational costs. In previous halvings, miners were able to recover from the reduction in block rewards due to subsequent bull runs. However, this time, miners are facing a different landscape. As Chainalysis has noted, instead of building cash reserves, miners have been more inclined to hold onto their Bitcoin in anticipation of higher prices, based on the performance of Bitcoin following the previous mining cycles.
Although the aggregate balance of mining pools has decreased by over 20%, the decline is relatively smaller compared to the first two halvings. Moreover, the fact that the price of Bitcoin reached a new all-time high just before the halving provides some comfort to miners, allowing them to sell off some of their holdings in preparation for the impending impact.
In addition to the halving, miners are also grappling with increasing competition from artificial intelligence (AI) companies. Power constraints in the US make it harder for miners to secure new low-cost power contracts, as tech giants like Amazon are willing to invest significant amounts of money in data centers.
All in all, Bitcoin miners are facing a double-whammy, with the halving event and growing competition posing significant challenges to their profitability and operations. The estimated $10 billion blow adds to the pressure already faced by these miners in an increasingly competitive and uncertain market.