BTC Miners Jittery Over The Coin’s Free Fall and Rewards Cut

News / 13.03.2020

BTC miners who are critical to the coin’s functioning are starting at massive profit cuts. This is according to a  March 13, 2020, Bloomberg report.

According to Chris Bendiksen, head of research at  CoinShares, the almost 40%  decline in Bitcoin’s price this month,  has pushed miners into the red. The miners account for a 3rd of all the network’s power.

Black Thursday

Crypto Twitter has christened March 12 ‘Black Thursday’ on crypto following  Bitcoin’s almost 40 percent plunge. As a result, the coin registered a low of $3,900. However, the currency clawed back on some of its losses and is currently stable in the $5, 500 zone. 

The drastic decline comes hot on the heels of the announced cut in rewards. The said cuts will take effect in May. Miners are looking at losing up to 50% of their rewards then. Unless the price rallies soon, this reduction will further aggravate the miners’ losses.

Many investors have always looked forward to the scheduled BTC halvings. To them, the event coincided with the coin’s rallying before or after them. Unfortunately, the year 2020 seems to confound this notion. 

Mining is Unprofitable

In related events, Charles Edwards, a digital asset manager, posted a Twitter chart detailing how unprofitable the current BTC price is to the average miners.

Mr Edwards contends that the cost of electricity for mining BTC exceeds the value of a single coin. He maintains that the current situation is unsustainable.  Consequently,  some miners may quit mining altogether.

Mati Greenspan, the founder of Quantum Economics, similarly projects that some miners will leave. Again, if the prices remain lower than the $ 5,500 level, the hash rate will go down. That said, he holds that new entrants will emerge to take their place as verifiers of transactions on the BTC network. 

BTC Miners Could Put Further Pressure on BTC Price

To cover their operating costs, miners typically sell some of the Bitcoins they’d earn as rewards. Considering the financial downturn they’re experiencing, they may exert more pressure on the crypto’s price.

Conversely, miners keep.most of their BTC earnings when they expect the price to rally. When the market is experiencing a downturn, they opt to increase their  BTC sales, thus flooding the market.

CoinShare’ Chris  Bendiksen posits that for the average miner to realise profits, BTC’s price must hold around $7,400. Additionally, the miner attains a negative cash flow around $4,500.

All in all, it is unlikely that many miners will immediately shut down their operations. The high expectations that BTC will rally in the coming weeks give credence to this notion. Many BTC miners will most likely quit after the 2020 halving if the prices don’t rise.

 

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Wayne is a Blockchain enthusiast and expert in crypto trading. Currently, he covers trendy issues on digital currencies.