The ongoing surge in Bitcoin BTC/USD prices is proving to be a boon for cryptocurrency miners. Their revenues have soared to unprecedented levels, thanks to a perfect storm of factors including the upcoming halving event and the growing interest from Wall Street, Deutsche Bank said in a research note.
What Happened: On Monday, daily mining revenue hit a new peak of $78 million, coinciding with Bitcoin’s rally to a $72,000 record threshold, reported Business Insider. Industry experts predict even higher prices in the coming months.
The surge is attributed to the increasing acceptance of Bitcoin by Wall Street, with 11 spot Bitcoin ETFs launched in mid-January. This success has prompted more institutions, including Wells Fargo and Merrill, to enter the market.
Other factors driving the boom include regulatory changes, relaxed monetary policies, and the upcoming halving event. The latter, which occurs every four years and reduces the Bitcoin reward for miners, has led to a $1 billion investment in new equipment by 13 firms since February 2023.
“The last halving took place in May 2020, reducing the miner reward from 12.5 to 6.25 bitcoins per block. Miners saw their profits significantly reduced overnight. Many were forced to shut down outdated rigs that became unprofitable to operate,” Deutsche wrote.
Despite the potential impact on profits, the halving cycle is expected to fuel the price rally, as seen in previous cycles. Analysts believe that the higher prices could lead to miners selling less Bitcoin, reducing supply and further boosting prices.
Last year, Standard Chartered analyst Geoff Kendrick noted that the token’s elevated prices might lead miners to sell fewer acquired bitcoins to maintain profitability. Consequently, companies could reduce their asset sales, leading to a decreased supply and potentially driving bitcoin prices even higher. In his latest projection, Kendrick anticipates bitcoin to reach $100,000 by the end of 2024, fueled by inflows to ETFs.
Why It Matters: The halving cycle could further boost the price rally for Bitcoin investors. Bitcoin prices have historically seen significant increases in the month leading up to the halving. The higher prices could mean that miners have to sell less of their acquired Bitcoin to maintain profitability, potentially reducing supply and driving Bitcoin prices even higher.
Furthermore, the surge in Bitcoin’s value is generating roughly 1,500 new “millionaire wallets” each day, as per a report by Kaiko Research. This indicates a growing interest and investment in the cryptocurrency.
Despite the record highs, market analysts believe that Bitcoin is not overcooked. Todd Gordon, founder of Inside Edge Capital, highlighted the contrast between Bitcoin's slight pause and the sharp decline of semiconductor stocks.
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