There is no guarantee that Bitcoin mining profitability will decrease after the upcoming Bitcoin halving, despite the halving of Bitcoin supply by 50%. According to Laurent Benayoun, the CEO of Acheron Trading, the reduction in mining rewards will be balanced out by the rise in network fees.
The Bitcoin halving is scheduled to reduce block issuance rewards from 6.25 BTC to 3.125 BTC on April 20. In the past, smaller mining companies were affected negatively due to the reduced block rewards post-halving.
However, the 2024 halving will be different as network fees are expected to increase due to Ordinals inscriptions and Bitcoin-native DeFi, also known as BTCFi. Benayoun mentioned the emergence of NFTs and DeFi projects on the Bitcoin blockchain as contributing factors to the rise in network fees.
Transaction fees on the Bitcoin network are currently at $4.88 per transaction, showing an increase from the previous year. Maintaining the Bitcoin price above $70,000 would generally keep mining companies profitable, as per Joe Downie, CMO of NiceHash.
Bitcoin's price has been trading below $70,000 since April 1, standing at $66,851 as of the latest data. The profitability of a mining firm also depends on the quality and energy efficiency of its mining equipment, rather than the size of the mining farm.
Despite the fluctuations in Bitcoin's price, the combined effect of price appreciation and increasing network fees will likely ensure that fewer mining firms go out of business compared to previous cycles, believes Benayoun.
