In 2024, the fifth Bitcoin halving will occur out of 32 total halvings. The event has the purpose of lowering the mining reward by half to trigger demand and diminish supply, considering that the number of Bitcoins to be released is finite. Bitcoin’s maximum supply is 21 million coins and has currently surpassed 19 million mined Bitcoins. Although it seems like Bitcoin is close to an end, it’s forecasted that the last coin will be mined around 2140, after which miners will be rewarded only through fee rates, so finding where to buy Bitcoin will be more difficult.
Mining gets more difficult as the years go by, and it might be even more complex to perform when Bitcoin reaches an end. With each halving, the revenue lowers by half and the hash rate increases, meaning more substantial computational power is required to leverage the same rewards as before a certain halving.
The mining difficulty already exploded months after the halving. So, what should miners be prepared for after the halving happens?
What will the 2024 halving look like?
In 2024, there will be the fifth halving of Bitcoin, where the reward will lower from 6.25 BTC to 3. 125 BTC. The first halving occurred in 2012 when the reward was cut from 50 BTC to 25 BTC, so you can have a broader image of what we’re coming from.
Most of the time, when halvings happen, the lack of Bitcoins supplied leads to a bullish period, where prices boom. At the same time, high volatility is present, but it doesn’t affect investors’ activities considerably. While this might be an excellent time for investors and traders, miners are at a disadvantage due to lower income and massive requirements for their rigs, which is the case for 2024, too.
Why is Bitcoin halving necessary?
Bitcoin created the reduction of coins propelled on the market, which was necessary due to its software design. Indeed, the creator of Bitcoin didn’t specify why it is halving this essential. Still, it has been speculated that the reason would be to increase the cryptocurrency’s value over time to lower supply.
It’s also considered that halving is a strategy for introducing deflationary measures to Bitcoin to counteract the fiat monetary system. However, many other cryptocurrencies are inflationary, so being deflationary doesn’t apply to all digital assets.
How can miners approach this halving?
The efforts of mining Bitcoin are already significant, as it’s the most energy-intensive cryptocurrencies. Bitcoin is also currently challenged by environmentalists, since it’s polluting the ecosystem. On top of these issues, miners are struggling to keep up with mining requirements, such as hardware, that change constantly based on the mining changes.
This halving might be one of the most challenging due to previous massive price swings, upcoming regulatory issues and the emergence of BTC ETFs. Hence, the market is all over the place, while miners must put their ducks in a row and withstand it.
To prepare for the halving, miners have no choice but to upgrade their hardware and increase energy efficiency to ensure the operational costs are lower than the rewards and, therefore, make mining profitable.
Strategies to prepare for the halving
Optimization is the keyword for ensuring Bitcoin mining is done right during this critical event. The first step should include updating the hardware solutions by approaching ASIC products that consume less energy and solve puzzles faster than GPUs. At the same time, they must find better locations in terms of electricity costs, but can also seek alternative energy resources, such as renewable ones. Becoming more energy efficient as a miner reduces your carbon footprint and reduces your operational expenses. Hence, solar or wind power might be the best solution for Bitcoin miners in the future.
Considering the difficulty of leveraging proper income, miners may need to diversify their income streams since mining might not be profitable in the long run. Luckily, crypto networks are full of opportunities, so they can participate in DeFi platforms, stake on the blockchain or learn new skills to offer superior services.
Moreover, miners also need to develop a personal risk management strategy to navigate all the possible challenges triggered by volatility. Besides taking advantage of price fluctuations, approaching options trading or hedging might be a good idea.
Finally, the best way to stay on top of the market as a miner is to collaborate and find partnerships through which you can support your activity and mitigate risks. This means communicating with other miners and sharing resources, as well as engaging with hardware manufacturers or energy providers.
What will happen after the halving?
The 2024 halving is set to happen in April or the beginning of May, depending on the market’s evolution. Some expect the Bitcoin price to experience a 50% increase one month after the event occurs, while in the following three months, the price will continue rising.
Estimations are based on previous price reports in the past halvings, but it’s still not clear if it will be the same this year. That’s because there are many other factors contributing to price swings, such as new market trends.
Of course, after this rally in price, the Bitcoin price will stabilize and reach lower rates, meaning investors must act right before the halving and a little bit after the event. The general optimistic ecosystem will generate significant returns for investors and traders.
On the other hand, miners should prepare beforehand regarding their equipment and strategy, forming more mining pools to withstand the new mining system. At first, it may be more challenging to have the same income as before, so efforts should double, and hardware must be updated.
Bottom line
The Bitcoin mining difficulty increased considerably in the past year, possibly in relation to the upcoming halving but also due to significant changes in the crypto market dynamics. Hence, miners must have been already preparing for the event to occur, when the mining reward will lower by half, meaning they must work harder to benefit from the same income as before. Updated hardware, new strategies and more collaborations are needed to mitigate the new system where supply is scarce to enhance demand and value.
