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Catastrophic disorder or healthy balance? How Halving Affects Miners

May 9, 2020

The block rewards for Bitcoin (BTC) are expected to cut in half in the early morning of May 12Many analysts are beginning to evaluate what the event will mean for the cryptocurrency markets and mining community.

Cointelegraph spoke to three analysts to get their unique views on whether halving is likely a “healthy balance” or a catalyst for migrating hash performance and rate increases.

Analysts discuss the effects of halving on miners

Johnson Xu, chief analyst at TokenInsight, predicts that the halving will have a significant impact on miners.

Catastrophic disorder or healthy balance? How Halving Affects MinersCatastrophic disorder or healthy balance? How Halving Affects Miners

“A large percentage of previous generation miners, such as the S9, will be neutralized at short notice and permanently removed from the network within a few months of halving,” said Ji.

“Halving Bitcoin will lead to short-term network chaos. However, once the difficulty setting takes effect and adapts itself to a state of equilibrium, the Bitcoin network will quickly return to a stable position. Halving is positive for the industry in the long term.”

“Halving Bitcoin is a healthy realignment to force the network to re-establish itself as an efficient network where miners can create enough leeway,” Ji concluded.

The halving affects the miners

While Zach Resnick, managing partner of investment firm Unbounded Capital, focused on Bitcoin SV (BSV), agrees that halving will disrupt mining operations. He predicts that the event will be anything but a healthy balance.

Resnick argues that the halving will devastate the BTC miners and will result in a hash power migration to competing chains like BSV or Bitcoin Cash (BCH) and high price losses.

“With the halving, many miners will no longer be profitable and some will likely switch to BCH and BSV mining,” said Resnick. “When miners give up the BTC network, the lockout times increase. When the price drops, more miners leave the network.”

“As the transaction volume increases, fees can quickly rise to an unusually high level as block space becomes scarcer due to longer block times. In the headlines where prices continue to fall, curfew times increase and interest rates continue to rise, high rates can occur occur. “

“Since we don’t believe there is a fundamental reason for price increases, we believe speculators who expect prices to rise will be more likely to cut the bait when the price stalls and are more likely to sell speculators when prices fall quickly. ”

“Many miners are also heavily in debt and may try to hasten exit if they no longer believe that a price hike is imminent,” he added.

Will prices go up after halving?

In contrast, the Chief Operating Officer of NEM Ventures, Nicholas Pelecanos said the halving “historically signaled the start of Bitcoin’s biggest bullish trends”.

However, Pelecanos found that reducing block rewards generally triggers a “short liquidation” along with an immediate decrease in hashing performance.

“The halving in 2012 was followed by an immediate sale of 10% and the sale in 2016 was followed by a longer decline of 38%. Both halves were followed by a decrease in the hashrate by approximately 50 days. “

Pelecanos predicts that Miners disruption can be temporary It says: “If history repeats itself and Bitcoin sinks after halving it, miners with high operating costs may have to shut down their platforms until Bitcoin reaches a sustainable price.”

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