Halving Has Happened, What’s Next? Crypto-Industry Stakeholders Share Their Expectations
On May 11th, block reward in the Bitcoin network was decreased from 12.5 to 6.25 BTC heralding the 3rd halving in the first crypto’s history. Block #630000, the first to bring a decreased reward, was mined by the AntPool mining pool.
Crypto-industry stakeholders from around the world shared their opinions about the consequences of the 3rd Bitcoin halving with ForkLog. Here’s what they said.
How will the 3rd halving transform the Bitcoin industry and the mining sector in particular?
Danny Scott, CEO of CoinCorner: I don’t feel like we’ll see any significant changes in the mining sector, this is the 3rd halving, most miners are well experienced in this and know what to expect. The main point for me is this marks the beginning of the next supply and demand equilibrium. Supply halves and prices will adjust to meet that happy medium.
Max Keidun, CEO of Hodl Hodl: I think that the entry threshold for mining will get higher. Since you will have to do twice as much work to mine one BTC, there will be more competition between the existing companies, and making new companies will be harder.
When it comes to the industry as a whole, halving will probably have a positive effect on the Bitcoin price, which will lead to new business opportunities. This means new projects, more interest from traditional finance, and more bullish moods.
Joshua Scigala, Founder and CEO of Vaultoro: The transformation already started in that ASIC chip manufacturers have caught up to the cutting edge. Miners now have the smallest and most efficient nanometer chip architecture that humanity has reached. This is interesting because in the past, if you purchased a miner, by the time it was shipped to you, there would be a better generation making yours almost obsolete. Now that miners have caught up to mainstream generalized chip fabrication, when you buy a mining rig, you know that there will not be one double as fast next month. This enables more predictability and the costs of miners will come down thanks to mass production.
One crazy use case, for instance, could be a single USB-powered lottery ticket that solo mines when you plug it in. Your chances to win a block are extremely slim but still better than winning a lottery. That is a strange use case that becomes available as ASICs are becoming commoditized. On the serious side of mining, we will see more and more powerplants installing bitcoin miners so they can do something with the excess energy that would have gone to waste. Powerplants have already started this trend, with one powerplant in upstate New York installing 7,000 Antminer S17s to capture lost profits. Both of these use cases are not affected by the 2020 halving.
Alejandro De La Torre, VP at Poolin: The industry will grow. This event is a key event for new entrants. New entrants know that in the next four years only 6.25 BTC will be mined per block. Also, the mining rigs can no longer improve exponentially, as we are reaching the limits of chip wafer sizes. Add these two factors together and you can see how new players will be more confident in making bets in the mining industry.
Haipo Yang, CEO of CoinEx: In the past, mining farms didn’t pay much attention to operation details and strategies, as the return is very high. However, after the halving, as the return gets much lower, mining farms have to pay more attention to the operations. They have to be well constructed, have professional talents to run, and search for cheaper power sources.
Advanced technology, such as chips, should be 7 nm or even 5 nm and the energy efficiency ratio has to go down. Only machines with an efficiency ratio lower than 40J/T are worth investing. The number of third party firmware service providers, especially for mining machines, will also increase.
The mining industry will have a scale-up development, and for individual players, the only choice will be cloud mining.
Anna Moskaleva, CBDO of Bizonex: Looking back at previous halvings, each time the mining industry was getting stronger. Small independent miners were becoming fewer, replaced by more professional companies. I think we will see similar consolidation this time as well.
Gregory Klumov, CEO of Stasis.net: Obviously, any hardware using electricity at 8–10 cents and higher will become unprofitable. Before halving, that sort of equipment is being used to get the most of it, since later it will have to be either scrapped or sold to one the countries with 2–3 cent electricity, of which there are only a few.
Just before the halving, the Bitcoin hashrate hit a new all-time high (ATH). Still, many experts think that after the halving the hashrate will drop. Do you agree with this? If yes, how low this dip could be and how long will it take to return to the current levels?
Danny Scott: Of course, the halving will impact miners and some may have to switch off until the price is high enough for them to turn back on. This is not all bad news, though, because the system was deliberately designed and built in this way to survive on incentives.
Looking at the actual stats rather than hearsay, we can see how potentially profitable miners will be after the halving (using assumptions and some rough numbers as an outline):
- Average electricity: $0.06
- Mining machine: Ant Miner S19 Pro
- Bitcoin price: $9,700
The profit margin for this works out to roughly +25%, which goes to show that it’s not all doom and gloom, even at the current Bitcoin prices. Additionally, the majority of miners will be confident in seeing Bitcoin’s value rise over the following months (otherwise why are they mining?) and most will likely continue as normal with little to no impact.
Ivan Maslov, Head of Development at Bitfury Russia: Hashrate will definitely drop. Among other things, the extent of this drop depends on the Bitcoin price, but I believe that it won’t exceed 30–40%. As previous halvings show, it will bounce back. Thanks to the high level of decentralization, there’s no threat the network security.
Joshua Scigala: I was lucky enough to be involved in Bitcoin when you could mine with a CPU. But even back then, mining was not profitable and would only cover electricity costs because Bitcoin didn’t have much market value. You mined with the expectation of holding and cashing out when it was worth more later.
The same thing will happen now. Miners will mine and hold, speculating, and covering power costs until they are forced to sell. Mining is fairly predictable apart from the BTC price. Miners know that every 4 years the profitability will drop by half and they account for that when deciding to build their business. The mining industry is simply going to look for cheaper and greener electricity like geothermal and hydroelectric, as well as to use up excess power that powerplants where going to the waste.
At the end of the day, miners that are not profitable will simply sell their rigs to people that can source cheaper power, so I feel hashes won’t drop. Greener, cheaper sources of power will be found. The small caveat is that the older generations of miners might go offline for good.
Alejandro De La Torre: I expect the hashrate to fall. The weakest miners will have to shut down unless we see a huge increase in the price. Prior difficulty adjustment was also at an all-time high. I concluded that around 15–30% will shut off. I suspect some miners will turn on again after the first difficulty adjustment takes place. The older machines will eventually shut off as new, better machines come online. These new machines will push the difficulty higher which will make older machines with less hash-power unprofitable. I foresee this happening in a span of a few months after halving.
Haipo Yang: Many old mining machines, especially S9, will fade away from the market. Unless there is a miracle that the BTC price doubles and rises. I think that under the current situation, it is almost impossible. In this case, many mining machines will be shut down, and the hashrate will definitely fall. It may fall somewhere between 20–30%.
Though most of the S9 will be shut down, it won’t be all of them. There will be differences in electricity prices in different regions. Some mining farms may have access to free electricity, so they could still run S9. The mining farms have been over-invested in the past several years, and there are a lot of redundant machine slots. Upon the construction of the mining farms, they may have some agreement with the electricity suppliers. They need to pay a certain amount of fee no matter how many machines are running. So under this circumstance, some mining farms will purchase second-hand mining machines.
It’s hard to say how long it will take to come back to the current level. It depends on the price of BTC and the supply of new mining machines. The epidemic has a big impact on the industry, both manufacturing and logistics.
Wright Wang, Marketing Director of MicroBT: If the price remains unchanged, the halving will inevitably affect the current mining revenue, and affect the machine that is almost shutdown to real shutdown. A large number of machines shut down will inevitably lead to a decline in the hashrate of the entire network. The conservative estimate is about 20–30%.
Anna Moskaleva: The hashrate is indeed going down. This happens mostly because old ASICs like Antminer S9s are shutting down. Although, I don’t see significant problems with that. Back when Bitcoin was at $3000, the network lost 20% of it’s hashrate but it got through just fine.
Gregory Klumov: Unlike traditional fiat currencies, Bitcoin has its inflation curve transparently laid out for 100 years in advance. Nobody knows how many dollars will be printed this year or the next. If you plot inflation curves for Bitcoin and USD on a chart, Bitcoin’s curve will be going down, and dollar’s will be going up.
Moreover, the rate of increase of USD supply changes abruptly: every ten years there’s a crisis and new dollars are printed. The main problem with dollars and other traditional currencies is that the inflation surges aren’t coordinated with the people who use the money.
Opinions vary regarding the Bitcoin price after halving. What do you expect in a short, medium, and long-term perspective? Do you think we can see a new ATH this year?
Danny Scott: My view is to ignore the short term volatility, too many people focus on this incorrectly. In the mid to long term, we will see natural growth with a standard supply and demand theory. I am in agreement with the Stock-to-Flow model promoted by PlanB, it’s a simple theory and is one of the best models I have seen for predicting Bitcoins price at a larger time frame scale. So yes I’m hopeful we will see a new ATH this year, historically we have seen previous ATH’s hit within 3-9 months of a halving, so $20,000 should be within reach before the year ends if we take history into account.
Max Keidun: It would be reasonable to expect price correction after the halving. Although, I didn’t expect that during the current pandemic the upcoming having would influence the price. It did grow over the last month, but it’s hard to say what comes next. It is likely that because of the crisis many people will invest in Bitcoin to hedge their risks, so the price may continue growing.
I, for one, wouldn’t expect a new record, though it still might happen. If the global financial crisis gets worse and its real consequences show up at later stages, if politicians and central banks will keep trying to stop it by printing money, there are chances that the price may grow. Still, I think that Bitcoin will trade between $10,000 and $20,000.
Ivan Maslov: Taking into account two previous halvings, the all-time high can happen in 1–1.5 years after halving.
Joshua Scigala: I don’t think we will see all-time highs in 2020. The halving is most likely priced in by now, apart from a bit of FOMO, but we can already start to see weak hands sell-off into the news. This correction is happening during a global pandemic, which is killing global markets that are being artificially propped up by quantitative easing.
While bitcoin is fundamentally a hedge against Wall Street and the central banks, over the last few years, we have seen bitcoin’s price discovery mechanism be loosely coupled to the wins of financial institutions. When there is a global banking crisis or a stock crash, people need to run to cash to cover other positions. This means they sell everything they can, including Bitcoin and even gold. Bitcoin will shine a few months after a full stock market crash and will become the new global standard for freelancers, especially in developing countries.
Alejandro De La Torre: I think there will be volatility because of the uncertainty of the total bitcoin hashrate.
Haipo Yang: During the collapse of March 12th–13th, the surge in demand for USDT led to a high premium for USDT. This premium not only appears in the RMB market but also in the U.S. dollar market. As the price is rising to a peak, the market is full of “go long,” and the demand for USDT has been greatly reduced, so a negative premium has appeared.
This shows that the current market is still a stock market. At present, it was more of a “carnival” of insiders before the halving, rather than a real bull market. People have to be careful about the risks. Institutions buying large amounts of Bitcoin does not mean a bull market. The real bull market is driven by individual investors, not institutions.
I think Bitcoin will enter an era of low inflation. At present, Bitcoin’s annual inflation rate is about 3%–4%. After this halving, the actual inflation rate of Bitcoin is lower than 2%, and this inflation rate is lower than most of the fiat currencies. From the perspective of the inflation rate or the proportion of circulation of Bitcoin, the impact of halving on the entire cryptocurrency market is becoming smaller and smaller. It means that Bitcoin has entered an era of almost full circulation, an era of low inflation, which has a far-reaching impact on the future. Therefore, my opinion is that the expectations for halving should not be too high. The higher your expectations for halving, the higher your disappointment.
However, in the long term, I’m still optimistic. More and more people are getting to know about cryptocurrencies. Besides, due to the unstable political environment in some countries, such as Iran, people need to find more ways to preserve the value of their money and they need to find more safe-haven assets, which makes more people interested in cryptocurrencies.
Anna Moskaleva: Historically, the Bitcoin price passed its all-time high marks the next year after halving. But the previous examples took place in a relatively normal world and economy. This time, the price may be growing faster, since more people consider Bitcoin as a safe haven asset because of the crisis. I think we will see the real rally in 2021.
Gregory Klumov: I was aggressive by saying that the right price to buy Bitcoin is $4,000–$5,000. There are chances we will never see prices like in the middle of March that again. I’m not sure about breaking price records this year, but over the course of three years, $100,000 is an achievable level.
Do you agree with the Stock-to-Flow model promoted by Plan B?
Joshua Scigala: Yes and no. If I go into the back yard and dig a giant hole with a spoon then I can say, there is only 1 hole, and it took me a long time and a lot of energy so please give me a million dollars for it. I believe I would have a hard time getting someone to see the value in my hole.
So I believe that Bitcoin needs scaleable use cases and they are coming hard and fast. The Lightning Network is becoming extremely useful and brings the flow back to stock-to-flow. If we, the community, manage to bring Lightning payments to the masses with an easy to onboard user experience, we will have the trifecta we need to go into the hundreds of thousands of dollars per coin: scarcity, utility, and collectability.
Ivan Maslov: The model’s greatest advantage is simplicity. But the real world is quite a bit more complicated. Like many others, S2F can be used as a general indicator and it works better in combination with other models, such as EMH. Still, even with a combination of the existing models, it’s impossible to create a reliable price forecast mechanism.
Anna Moskaleva: It is just a model, like any other. The price of Bitcoin is largely influenced by the large players’ manipulations. Sure, the inflow of money into Bitcoin will continue and grow, but it’s hard to make precise predictions about its price.
This time, halving takes place amid a massive economic crisis and fiat hyperinflation in many countries. Could it be the historic time for Bitcoin to earn its place under the sun?
Danny Scott: I actually wrote an article at the beginning of April to highlight some of these exact points showing Bitcoin was going to be in for an explosive year. Since then, Bitcoin has risen 32% and the sentiment around the industry has only become more bullish as the financial crisis around the world begins to hit. We’ve even seen the very reputable billionaire hedge fund manager Paul Tudor Jones say he has now taken exposure to Bitcoin saying “the best profit-maximizing strategy is to own the fastest horse.” It feels very much like we are seeing a collection of very powerful moves combusting together, which could be the cause of Bitcoin’s next powerful bull run.
Max Keidun: I’ve heard that if Bitcoin doesn’t earn its place under the sun in the correct meaning of the phrase (although I’m not sure which one is correct in this case) its future is looking rather grim. I don’t agree that the fate of Bitcoin is decided by this particular crisis, but it should anyway come out of it stronger than before. This would mean that more people will be using crypto leading to a greater extent of mass adoption.
Therefore, it’s probably safe to say that this crisis is the first real test for Bitcoin. During the previous crisis, it was still nonexistent or too niche. Now, Bitcoin is a full-fledged asset used by Wall Street companies and I think it’s ready to establish itself in some way.
Joshua Scigala: Absolutely, the problem I see is that if people wait too long to move out of fiat, they will have no value left to buy rare numbers with.
This is why I am also very bullish on rare metals. The masses understand gold as a hedge against inflation. If they are not comfortable with Bitcoin yet because of the inherent learning curve and complexity, then they should jump into any other rare asset right now. Once they have done that, they can still jump into Bitcoin as they have secured that value away from the massive inflation wave that is coming our way in the fiat worlds.
Ivan Maslov: The combination of halving and the global financial crisis provides fundamental reasons for Bitcoin to gain strength, compared to traditional instruments. Considering the uncontrolled emission of major fiat currencies, Bitcoin can be a good alternative thanks to its deterministic and immutable emission mechanism.
Anna Moskaleva: It’s worth noting that Bitcoin was introduced at a historic moment in time when central banks started printing substantial amounts of money to fight the 2009 crisis. Since then, the price and the adoption of Bitcoin have only grown. Meanwhile, the central banks around the world swell with the amount of money they printed and the assets they bought with that money to save governments and banks.
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