Main financial assets discussed: Bitcoin (BTC-USD), Bitcoin mining companies (RIOT, MARA, CLSK, IREN, BITF, HUT)
Top 3 key points:
1. The upcoming Bitcoin halving event in 2024 is expected to be bullish for Bitcoin investors, but potentially bearish for Bitcoin mining companies. The halving event will reduce mining rewards, which could lead to decreased profitability for mining companies.
2. Investing in Bitcoin mining companies is a risky bet, as their profitability depends on the Bitcoin price doubling or more after the halving event. Most mining companies are already operating at a loss when Bitcoin is below $40,000.
3. If Bitcoin mining rewards were to halve now, many mining companies may become insolvent. Only the fittest and most efficient mining companies with larger balance sheets are likely to survive and potentially acquire competitors at low prices.
Recommended actions:
- **Buy**: Bitcoin (BTC-USD) is recommended as a safer option due to multiple drivers for price appreciation and potential approval for a Bitcoin ETF. Consider hedging with ProShares Bitcoin Strategy ETF (BITO) put options and staking for additional passive income.
- **Sell**: Bitcoin mining companies (RIOT, MARA, CLSK, IREN, BITF, HUT) are not recommended due to the potential decrease in profitability after the halving event. Most mining companies are already operating at a loss and may become insolvent.
- **Hold**: N/A
In the latest episode of Market Talks, the future of BTC mining, the impact of the upcoming Bitcoin halving, and the ability for miners to hedge their operations with hash rate derivatives are discussed, with predictions that Bitcoin's volatility will decrease over time and the market will experience macro headwinds and potential new lows in the next six months.
The upcoming Bitcoin mining reward halving in April 2024 is anticipated to boost the cryptocurrency market, although previous halvings did not single-handedly initiate bull runs, as macroeconomic factors like fiat liquidity conditions also played a significant role, according to MacroMicro data. The growth rate of the M2 money supply by major central banks, including the U.S. Federal Reserve, European Central Bank, Bank of Japan, and People's Bank of China, is expected to impact the magnitude of the halving-induced uptrend.
The upcoming Bitcoin halving in April 2024 will reduce block rewards for miners, prompting them to focus on strategies such as securing lower electricity rates, using more energy-efficient equipment, and accumulating excess capital in order to maintain profitability. Miners may also explore alternative revenue streams like Bitcoin Ordinals, which generate transaction fees within the Bitcoin network.
Bitcoin halving, which is expected to occur in mid-2024, is already 85% complete, and the supply held by long-term holders is nearing its all-time high, suggesting that a mature bull market may not begin until next year.
Bitcoin's upcoming halving event in April 2024 has generated high anticipation, with predictions of another massive rally and a possible surge past $100,000; however, past performance, supply and demand dynamics, and evidence from Litecoin suggest caution in relying solely on these predictions.
Crypto analyst Nicholas Merten believes that the next Bitcoin halving in 2024 will not have a significant impact on the market due to the diminishing returns of the event over time.
