How Bitcoin Miners Are Preparing for the Halving in April

The Bitcoin halving is one of the most anticipated events in the crypto space. It occurs every four years, when the network protocol reduces the rewards for verifying transactions by half. The next halving is expected to happen in April 2024, when the block reward will drop from 6.25 to 3.125 bitcoins.

The halving is designed to limit the supply of Bitcoin to 21 million tokens, creating scarcity and potentially increasing its value over time. However, it also poses a challenge for miners, who have to cope with lower revenues and higher costs.

Miners are the backbone of the Bitcoin network, as they use specialized hardware to solve complex mathematical problems and secure the blockchain. They receive newly minted bitcoins as well as transaction fees as incentives for their work.

But as the halving approaches, some miners are taking steps to prepare for the impact on their profitability. According to data from CryptoQuant, miner reserves — unsold Bitcoin held in digital wallets associated with the companies — have dropped by 8,400 tokens since the start of 2024 to 1.8 million, a level last seen in June 2021. Analysts said the decrease indicates miners are selling tokens.

“Miners have begun to sell more of their coins to bolster balance sheets and fund growth capex ahead of tougher times for margins when block rewards are halved in April,” said Matthew Sigel, head of digital-asset research at VanEck.

The miner sales appear to be weighing on the Bitcoin price, which has struggled since the Jan. 10 approval of the first US exchange-traded funds to directly hold the digital asset. The token has shed about 6% to $43,000 in that period.

Since the ETF approvals, a net 3,617 Bitcoin have moved from miner wallets to exchanges, according to CryptoQuant. On Feb. 1, there was a net outflow of 13,542 tokens, the largest single-day efflux since December 2020.

“Miners seem to be selling their holdings of Bitcoin to finance the purchase of more efficient mining rigs,” crypto exchange Bitfinex wrote in a recent note. “The reduction in revenue could especially impact smaller mining operations, potentially pushing them out of business.”

While smaller mining companies with less access to the capital markets might be tapping their Bitcoin kitty, larger firms have been utilizing cash reserves and raising money by selling shares.

Marathon Digital Holdings Inc., the largest US miner, said it would sell Bitcoin from reserves in the past to cover operating expenses. But since curbing debt last year, the firm has been adding to its cash and Bitcoin positions.

“Marathon has approximately $1 billion of cash and Bitcoin on its balance sheet,” its Vice President of Corporate Communications Charlie Schumacher said. “That war chest, which includes 15,741 Bitcoin, provides us with the flexibility to do well if Bitcoin’s historical price cycles repeat, or to take advantage of consolidation opportunities if there is pressure on the industry.”

Bitcoin rebounded 157% last year, a bet on widening demand courtesy of the US spot ETFs as well as on the traditional view that halving is a prop for the token’s price.

However, some analysts warn that the halving effect might not be as strong as in previous cycles, as other factors such as regulation, institutional adoption and environmental concerns could play a bigger role in shaping Bitcoin’s outlook.

“The halving is not a silver bullet that guarantees higher prices,” said Noelle Acheson, head of market insights at Genesis Trading. “It’s a supply shock that historically has coincided with increased demand, but correlation is not causation.”

Sources:

- [Bitcoin Outlook Clouded by Falling Miner Reserves Ahead of April’s Halving](https://finance.yahoo.com/news/bitcoin-outlook-clouded-falling-miner-050844813.html)

- [Bitcoin Miners Offload $129M BTC in Day, Sending Reserves to Lowest Point Since May](https://www.coindesk.com/business/2023/12/29/bitcoin-miners-offload-129m-btc-in-day-sending-reserves-to-the-lowest-point-since-may/)

- [What Is Bitcoin ‘Halving’? Does It Push Up the Price?: QuickTake](https://www.bloomberg.com/news/articles/2021-05-11/what-is-bitcoin-halving-does-it-push-up-the-price-quicktake)