The market’s excitement regarding the block reward halving is generally direct at Bitcoin – not any of its forks. But as forks, they, too, undergo halving events. For smaller networks, where a fee market is not even close to developing, a halving event can be catastrophic, April 9, 2020.
Mining Perils on Bitcoin Cash
At $265 per BCH, the block reward for miners has dropped from $3,310 to $1,655 in the span of a block. The halving is meant to reduce supply and disinflate Bitcoin, but is this worth it at the risk of putting miner’s underwater and pushing them out?
Altruistic mining was already big on unprofitable networks like Bitcoin Cash and Bitcoin SV. Rational miners would switch over to BTC in order to profit, but those with agendas or contrarian theses continued mining at an opportunity cost on Bitcoin Cash and SV.
Almost two hours after Bitcoin Cash halved, there was only one block mined, leading many to believe miners abandoned the network right after the halving. Many miners, including Roger Ver’s Bitcoin.com, have slowly reduced their hash rate exposure to Bitcoin Cash. However, overall hash rate didn’t see a major decline in the last week.
On a positive note, transactions nearly tripled from April 7 to April 8, but whether this is sustainable or a one-off event is yet to be seen.
Halving May Not Be Bullish for Bitcoin
If Bitcoin Cash and Bitcoin SV miners are emotionally attached to their networks, enough to forego short term profit, Bitcoin miners can be put in exactly the same bracket. They can be expected to stick around after the halving if the price continues to stay suppressed.
But if the global economy is truly headed for a depression, and appetite for risk-on assets like Bitcoin is muted, how long can we expect all miners in the crypto ecosystem to remain altruistic and burn cash to no end?
If it wasn’t for the current condition of the economy, the probability of the halving being bullish would’ve been much higher. The end-effect of the halving is to keep demand constant while reducing supply, leading to a higher imbalance of demand over supply. But in a scenario where demand may not be as strong as before, the price may not recover as swiftly as previously expected.
Miner’s may be financially hung out to dry in a time when they desperately need revenue.
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