The coronavirus has got crypto crashing as of late, but it’s not just the individual coins themselves that are suffering. Miners are also experiencing the harsh realities of a falling industry.
Bitcoin Miners Are Likely to Be Hit Hard
At the time of writing, bitcoin—the world’s number one cryptocurrency by market cap—is trading for a flimsy $5,300, and even this is nowhere near as low as the number ($4,100) that bitcoin struck during yesterday’s late-night hours. Overall, the asset is down by about 50 percent since reaching a high of about $10,350 last month.
Price drops like these have monster-sized effects on miners, who are paid through digital rewards for extracting new coins. With such drops at hand, the rewards they’re earning have dropped as well. We can count on that, but even worse is that these drops are occurring at a time when a significant halving event is about to take place.
One of the big things about the halving that had everyone excited was that it was going to allegedly push bitcoin’s price to a new high. In the past, every halving that’s occurred has rocked the asset it underlies into greener pastures, and this event was expected to bring more of the same.
However, it’s unclear what will happen now that the global economy has taken on so much gloom and doom, bringing cryptocurrencies, stocks, bonds and even oil down with it. Granted we’re still experiencing coronavirus panic in May – the time of the scheduled halving – it’s possible bitcoin’s price could incur a retraction rather than a boost.
Another blow? The halving means another slash to bitcoin mining rewards. Thus, whether the currency goes up or down in price, miners are likely to suffer. Right now, the price dips have caused them to lose some of their reward money outright, but the halving will guarantee their rewards drop even further. Will miners leave the industry in droves like they did in 2018 if things don’t improve?
Ryan Watkins – a crypto analyst with Messari.io – explains:
It just really damages the bitcoin halving narrative that people have been making. People were expecting price increases either before or after the halving, whereas now it seems like the exact opposite is going to happen.
According to Chris Bendisken – head of research at Coin Shares – the price of bitcoin would have to be at around $7,400 for a miner to garner an average reward rate. However, there’s another problem in that many of the miners working today still utilize previous generation miners that are slower when extracting new coins.
Several May Wind Up Leaving
He says if a crypto rally doesn’t occur after the halving, many miners are likely to exit the industry:
The miners that have predominantly new gear, they are probably fine, but then you have the previous generation ones. They are starting to sweat a little. If the prices remain like this, the halving will finish them off.