Will miners allocate more computing power to BTC after BCH and BSV halving?

Will miners allocate more computing power to BTC after BCH and BSV halving?

In its latest State of the Network report published on March 31, Coin Metrics believes that Bitcoin is in the midst of a “miner capitulation” spiral, and that the situation is likely to get worse before it gets better.

Author: Jason from Golden Finance.

According to a new forecast, some miners may choose to "capitulate" as the price of Bitcoin (BTC) has failed to achieve a significant increase. On the other hand, as Bitcoin Cash (BCH) and Bitcoin SV (BSV) are about to usher in halving, these events may further fuel market turmoil. In the latest network status report released on March 31, Coin Metrics believes that Bitcoin is in the vortex of "miner capitulation", and this situation may get worse before it gets better.

Coin Metrics predicts Bitcoin miners are entering “capitulation mode”

Although the price of Bitcoin has rebounded by more than 70% in just two weeks after hitting a low of $3,700, the current price of Bitcoin is still below the "break-even point" for some less efficient miners. In fact, from the fact that the difficulty of Bitcoin mining has dropped recently, we can also see that miners should be in a more difficult state. The last mining difficulty adjustment dropped by nearly 16%, the largest drop since 2011.

Coin Metrics concluded:

“We expect that miners are entering a cycle where profit margins decline, selling increases, and some of the least efficient miners in the Bitcoin mining network are eliminated as some miners capitulate. However, once this cycle is complete, the Bitcoin mining industry will return to a healthy state and be able to support future price increases.”

Some people believe that after the Bitcoin block reward is halved, miners' profitability will be further squeezed because miners will receive less Bitcoin for each block they confirm. In fact, miners' capitulation does make sense, as it has already been seen in Bitcoin's hash rate: Bitcoin's total network hash rate has dropped significantly in the past three weeks, and this trend may not be over yet, as some simple factors seem to indicate that more miners may capitulate in the short term. According to Skew data analysis (as shown in the figure below), Bitcoin's hash rate plummeted in March 2020, falling below 100EH/s for the first time since January 2020. In the past, the total network hash rate usually rose in the months before the Bitcoin block reward was halved, but this time it may be due to factors such as the special macroeconomic fluctuations caused by the new coronavirus epidemic. Similar situations seem to have never happened before.

Will the Bitcoin Cash and BSV halving detonate a "bomb"?

In the short term, the recent market turmoil will continue to "hit" miners and affect Bitcoin. Another thing to watch is that two cryptocurrencies with a high correlation to Bitcoin will "halve" before Bitcoin, namely Bitcoin Cash and BSV. At the time of writing, there are seven days until the Bitcoin Cash halving, and eight days until the BSV halving, when the block rewards mined by Bitcoin Cash miners and BSV miners will be reduced by 50%.

In contrast, the Bitcoin halving will take place in May, about 43 days away, when the block reward miners mine will be reduced from the current 12.5 BTC to 6.25 BTC.

According to Coin Metrics, the early halving of Bitcoin Cash and BSV will provide Bitcoin with a time window of about a month during which miners will allocate more computing power to Bitcoin because even though the cost of mining has increased now, the block reward will be higher.

Coin Metrics added in its report:

“When the Bitcoin Cash and BSV block rewards halve, it forces miners to allocate more computing power to Bitcoin, so for at least a month, the Bitcoin mining reward will still be 12.5 BTC instead of 6.25 BTC. Therefore, we expect that after the Bitcoin Cash and BSV halving, the Bitcoin mining difficulty will increase, and miners’ profit margins may be further compressed.”

What’s “interesting” is that for some Bitcoin market analysts, especially those who support the S2F model, they are eagerly looking forward to the positive impact of the halving on the Bitcoin price. Because according to the S2F model, the average trading price of Bitcoin may reach $100,000 sometime in 2021 until 2024.

At the time of writing, according to CoinMarketCap data, the price of Bitcoin is $6,270.74, down 3.17% in 24 hours, with a market value of approximately $114.748 billion. Currently, the total computing power of Bitcoin is 104.76 EH/s, and the total difficulty is 13.91T. There are still 6 days and 19 hours before the next mining difficulty adjustment, and the next difficulty may reach 12.53T, a drop of about 9.96%. It is expected that the halving time of Bitcoin production will be May 15, 2020, and the current number of remaining blocks is 6,069.

Part of this article is compiled from cointelegraph