Analysts report the establishment of a new norm in cryptocurrency mining profitability following the fourth Bitcoin halving.
Bitcoin miners are beginning to feel the impact of the halving, as their earnings have dropped to a new low. Post-April 20th, their primary income source was halved, forcing them to adjust to the new market conditions.
A halving is a scheduled event encoded into Bitcoin’s algorithm, designed to reduce the number of new bitcoins generated by miners as they validate transactions in the blockchain. This process involves solving complex calculations to finalize blocks of transactions, which are then added to the blockchain.
Once a miner successfully confirms a block of transactions, they receive newly minted bitcoins as a block reward. On April 20th, this reward was halved from 6.25 to 3.125 BTC. Miners earn from two sources: this fixed block reward and transaction fees. While the former source was planned to halve on April 20th, the latter remained unusually high until early May but also declined in the days following.
The transaction fees are not based on the transaction amount but on the data size of the transaction in bytes. With limited space in each block and high demand, fees increase. The introduction of Ordinals and Runes protocols, Bitcoin’s version of NFTs, has allowed media files to be included in transactions, significantly affecting the overall transaction size and, consequently, the fees miners receive.
The Runes protocol launched concurrently with the Bitcoin halving. It allows for the creation of token collections, which immediately generated speculative hype. To get transactions into the “anniversary” block 840,000, which marked the halving, users paid inflated fees—over $100 for Bitcoin transfers and thousands for minting BRC-20 and Runes tokens. Tokens from the first blocks post-halving are believed to hold greater value for speculators and collectors.
This effect was short-lived. By early May, total income from block rewards and fees had plummeted to a new low of $26.3 million, according to Blockchain.com data. Before the halving, miners averaged about $60 million in daily earnings.
Publicly available wallets of major mining pools allow analytical services to track miners’ income in real time. Public mining companies also regularly submit financial reports to regulators, which are publicly accessible.
The halving logically reduced the number of bitcoins mined. Canadian mining company Hut 8 reported that it mined 36% fewer coins in April compared to March—148 BTC versus 234 BTC. According to The Miner Mag, Hut 8 dismantled over 25,000 mining devices in April to minimize downtime of unprofitable equipment.
A spike in Bitcoin’s price in March provided significant income for miners, which they invested in new equipment or additional capacities. For instance, American Bitfarms announced a $240 million expenditure on more efficient equipment to cope with the halving’s effects. The largest U.S. mining company, Marathon Digital, spent over $200 million on acquiring data centers to house its equipment.
Following the halving, the record increase in mining difficulty and the drop in transaction fees led the Bitcoin Hashprice Index to reach a historical low of $40 on May 2nd.
The indicator value of $50 on May 7th means a Bitcoin miner spending one petahash per second (PH/s) of computing power can earn $50 a day. For comparison, at the end of 2021, this indicator reached $3,500. From the beginning of 2024 until the halving, it ranged from $77 to $120.
Experts calculate that post-halving, the average cost to mine one Bitcoin will rise to $53,000. Ki Young Ju, founder of the analytical platform CryptoQuant, noted that Bitcoin needs to remain above $80,000 for mining with popular devices to stay profitable under current conditions.