The Bitcoin Network, Mining Profitability & The Halving Effect

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10 Jul 2024

By Design
Unlike fiat currencies around the globe, Bitcoin has a preprogrammed monetary policy that is set in stone. Global events, political ideas, and other factors dictate fiat monetary policy. In short, fiat currencies are essentially void of monetary policies. Why do I say that? Well, a policy is something that can be relied upon and even trusted to a certain degree.
You may choose to shop at a certain outlet due to their policies. That wouldn’t be the case if those policies were frequently changed, especially with little warning. This is the world of fiat currencies… blown about without foundational, unchanging policies. And yet, the average individual places so much trust in an untrustworthy instrument. Many are choosing to trust in code/mathematics in favor of the former.
The halving, by design, reduces the incoming supply over time. However, the reduction in supply not only manifests within the supply/demand dynamic but simultaneously, places incredible pressure upon the miners. Essentially, miner revenue is instantly cut in half the moment the halving block is completed. Imagine your business’s revenue was reduced by 50% in a single day with zero chance of returning.
The only way a business owner in this predicament survives is if he can increase the cost of his goods and services. Essentially, this is what MUST transpire regarding the Bitcoin price if miners are to continue operations. We have seen this with every halving event… miners struggle initially. However, within several months, the price begins to adjust in favor of the miners.
It’s Not An Option
This is not a hopeful scenario… it is what must transpire for the network to remain healthy, as well as to experience continuous growth. Miners can and will capitulate from time to time. However, miners cannot capitulate indefinitely… so there is a reasonable expectation from the miners and the market for the BTC price to increase significantly. Since the halving miners have been extremely underpaid.

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The screenshot above reveals that apart from a brief period when BTC cracked the 70K level miners have been suffering. This cannot continue indefinitely, so, as in times past, the price has no option but to adjust. Yes, as the halving cycles progress, it becomes increasingly more difficult to do so. However, the survival and health of the network demand that the price increase over time.
I remember the pessimism of every halving event regarding the required price increase. It’s always the same, yet BTC manages to come through every time. Next year I will be celebrating an entire decade in the Crypto space… so I have witnessed a fair amount and lived through numerous cycles. As difficult or impossible as it may appear to some, higher levels are on the horizon.
In the previous cycle, the covid crash interfered with the order of things. This cycle is the turn of Mt. Gox and the FED. However, these scenarios are temporal and will eventually become powerless in the face of growing investor sentiment and even, demand. Financial markets require a cool head accompanied by patience. However, when it does happen it happens quickly!

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Final Thoughts
As previously mentioned, I will only become concerned if we are at these levels in September. That being said, I expect to see $70K during July. Even the first two weeks of August would be good enough for me. Things will really heat up during the final quarter of the year. Relax, enjoy the ride, and keep stacking sats! See you next time!

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Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.