Bitcoin Halving: Impact on BTC Mining Costs

The Bitcoin halving occurs every 210,000 blocks, which is roughly every four years. During this event, the block reward for miners is cut in half. This not only indirectly affects the price of BTC but also has a significant impact on miners’ behavior. The cost of mining doubles, making it more expensive for miners to earn the same amount of BTC. Recent data shows that the cost of mining with Antminer S19 XPs will increase from $40,000 to $80,000.

The rise in BTC price after the halving compensates for the increased mining costs. In May 2020, the profitable price for miners to continue mining rose above $30,000, but the price of BTC reached an all-time high of $69,000 during the same cycle. Currently, the average cost of mining one Bitcoin is $49,902, while the BTC price is above $70,000. After the upcoming halving in April, the average mining cost will rise above $80,000. To sustain operations, miners would need the BTC price to trade higher than $80,000.

Historically, BTC prices have experienced significant increases after each halving. After the 2012 halving, the price surged by around 9,000% to $1,162. Similarly, following the 2016 halving, the price jumped approximately 4,200% to $19,800. In the most recent halving in 2020, the price increased by almost 683% to $69,000. Despite concerns about profitability, miners have remained profitable after each halving.

Halving events also render many mining machines obsolete as they cannot keep up with the high demand for hash power. In the period following each halving, there is often a time when the BTC price falls below the profitable threshold for miners. This leads to increased selling of mining rigs and small-scale miners going out of business. As demand rises and market supply declines, the price eventually increases and often surpasses the average mining costs for miners.