03/13/2024 0 Comments

1. Biden’s 30% Tax Proposal: A Threat to U.S. Bitcoin Mining?

Bitcoin mining, the process by which transactions are verified and new bitcoins are created, is notoriously energy-intensive.

Proposed Tax Hits U.S. Bitcoin Mining

Miners use specialized computers that consume vast amounts of electricity to solve complex mathematical puzzles. Bitcoin mining’s energy use and large carbon footprint have sparked debate over its climate change impact.

The proposed 30% tax is part of a broader initiative by the Biden administration to address environmental concerns associated with Bitcoin. The administration hopes to cut mining energy use by taxing electricity and pushing for greener practices or relocation.

However, this proposal has sparked a significant backlash from the cryptocurrency community and proponents of digital currencies. Critics say the tax may stifle U.S. crypto innovation and push miners to less regulated, cheaper energy countries. This exodus could, in turn, lead to a loss of jobs and economic activity related to the cryptocurrency industry within the United States.

More About Bitcoin Mining’s Bill in the US

The debate over the proposed tax highlights the broader challenge of balancing the economic potential of cryptocurrencies with environmental sustainability. Balancing crypto growth with reducing its environmental impact is crucial as it gains wider acceptance.

The Biden administration’s proposal is a clear signal that environmental considerations are becoming increasingly important in the regulation of the cryptocurrency industry. Whether this proposed tax will be implemented remains to be seen, but its introduction has undoubtedly ignited a conversation about the future of Bitcoin mining in the U.S. and the need for sustainable practices within the cryptocurrency sector.

2. Bitcoin Miner Revenue Reaches All-Time Highs

Bitcoin (BTC) miners are reaping record profits, with daily mining rewards reaching a record-breaking $78.89 million on March 11, according to data from Blockchain.com. This surpasses the previous high of $74.4 million set in October 2021. The surge in miner revenue coincides with Bitcoin’s own record-breaking run. The leading cryptocurrency recently hit an all-time high of $72,953 on March 12.

Transaction fees, along with block rewards, contribute to miner revenue. Currently, miners receive 6.25 BTC for every successful block created. The recent uptick in transactions translates to more rewards for miners who secure the network. The Bitcoin hash rate, a measure of the network’s processing power, recently reached an all-time high of 676 exahashes per second (EH/s) in February. Despite a slight dip, the hash rate remains significantly higher than last year.

However, with the upcoming Bitcoin halving event in April, some miners are taking precautions. The halving will cut block rewards in half, from 6.25 BTC to 3.125 BTC. To offset this decrease, some miners are reinvesting their profits in additional mining equipment, according to a Bloomberg report. Data suggests major mining firms have purchased over $1 billion worth of rigs in the past month.

On-chain data from Glassnode indicates that miners are also selling some of their Bitcoin holdings, potentially to prepare for the halving or capitalize on the recent price surge. This selling activity is considered normal within a bull market, especially considering the record transaction volume pushing more Bitcoin onto the market.

3. The Bitcoin Halving is Getting Near: Miners Need to Prepare, According to Fidelity

Fidelity Digital Assets have stated in a recent report that while Bitcoin (BTC) holders typically anticipate the quadrennial reward halving to boost prices, miners must actively strategize to plan for the upcoming event to prevent going bankrupt.

Notably, the halving event, expected on or around April 19, will reduce their earned Bitcoin by 50%.

Bitcoin Miners’ Challenges as Halving Nears

According to analyst Daniel Gray, miners must sustain their current hash rate, energy consumption, and infrastructure and face ongoing competition from the entire network, all striving to maintain profitability amidst the same challenges.

Bitcoin miners usually exhibit bullishness as they persistently mine a commodity they anticipate will appreciate over time. The report emphasizes that miners must be proactive rather than merely maintaining their position within the network if they are to profit.

Gray highlights that miners must continually strive to increase their hashrate efficiency, secure lower-cost energy from more economical sources, and expand their infrastructure to accommodate new machines. However, given the competitive landscape, every miner vies for the same resources.

Fidelity notes that the period following the halving poses significant challenges as Bitcoin adjusts to the immediate reduction in rewards, necessitating miners to possess capital reserves to cushion the decline in revenue.

Nonetheless, the report suggests that new layers could introduce fresh use cases and attract more users as the protocol evolves. Despite the historical trend of weaker miners exiting the market post-halving, the industry has consistently rebounded with increased miner participation and hashrate, showing the resilience of both the network and the industry.

Notably, previous halvings in 2012 and 2016 saw the hashrate dip temporarily before rebounding.

Bitcoin Price Could Drop

While Bitcoin’s recent surge to over $69,000 has been remarkable, analysts at JPMorgan caution that the asset’s forthcoming halving event could exert downward pressure on prices, potentially leading to a dip to $42,000.

According to analysts, Bitcoin’s production cost has historically been a floor for its prices. Post-halving production costs could double to approximately $53,000, which might decrease the Bitcoin network’s hashrate as fewer miners compete to produce BTC. The projected $42,000 price level is also where the analysts anticipate that Bitcoin prices will stabilize once the halving event’s euphoria subsides after April.

Alessandro Cecere, head of marketing at mining pool Luxor, notes that even if the mining reward halves, miners could still maintain profitability if Bitcoin’s price reaches $100,000, maintaining their earnings over time.

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Harvey CHEN