08/04/2023 1 Comment

1. Bitcoin Can Be ESG Driver

Due to the energy-intensive nature of the bitcoin mining process, many consider miners and the digital currency itself detractors to environmental, social, and governance (ESG) and sustainability objectives.

Those criticisms can affect bitcoin mining equities and the exchange traded funds that hold those stocks, including the Invesco Alerian Galaxy Crypto Economy ETF (SATO). Fortunately, some experts are optimistic that the bitcoin mining industry is cognizant of the need to be a better environmental steward. There is also optimism that it sees long-term benefits in boosting adoption of renewable energy.

The current proof-of-stake mining system contributes to air pollution and climate change. Indeed, the ASIC hardware used to mine bitcoin results in a process that produces Scope 1 emissions. This indicates that some SATO member firms would do well to increase adoption of green energy.

As noted by KPMG, bitcoin mining requiring a lot of energy isn’t so much the problem as is the use of fossil fuels in the mining process. Bitcoin miners’ consumption of fossil fuels creates harmful emissions, and that weighs on the industry’s ESG credentials.

Bitcoin Miners Have Advantages

SATO member firms can locate mining farms nearly anywhere they choose. This is advantageous when dealing with some reliability issues tied to renewables.

“Renewable energy facilities are incentivized to produce at their maximum capacity to deliver electricity in a manner consistent with their contractual agreements,” observed KPMG. “This can leave utilities with an excess supply of electricity, which if coupled with a supply and demand mismatch, can lead to low, and even negative, electricity prices.”

Bitcoin miners have the ability to be selective when it comes to location, as well as other advantages. Miners, including those that dwell in SATO, can leverage this over the long term to potentially bolster their ESG resumes.

First, bitcoin miners can swiftly adjust to real-time demand conditions. In a hypothetical example, a bitcoin miner operating in the Phoenix can scale back activity during sweltering summer days. This would reduce energy consumption. Conversely, when energy demand falls during the more accommodating winter months, miners can increase output.

Second, as noted by KPMG, bitcoin miners can “provide additional incentive to the buildout of renewable energy capacity.” Moreover, in a broad sense, bitcoin arguably isn’t getting the ESG credit it deserves.

“Bitcoin appears to provide a number of benefits across an ESG framework,” concluded KPMG. “Throughout its short history, new and innovative ways of leveraging the network and its native asset continue to emerge, such as helping to stabilize energy grids, reduce greenhouse gas emissions, and even assist with providing sustainable heat to commercial and residential properties.”

2. When is the Next Bitcoin Halving?

When is the Next Bitcoin Halving? A Comprehensive Guide

The countdown to the next Bitcoin halving is on, and it’s attracting the attention of both seasoned crypto enthusiasts and newcomers to the blockchain scene.

In 2024, the scheduled event will halve the current mining reward of 6.25 bitcoins per block on the Bitcoin network for miners.

But what does this reduction mean for the Bitcoin ecosystem? And how has it impacted the cryptocurrency’s price movements in the past?

Understanding the Bitcoin Network

The Bitcoin network operates on a technology known as the blockchain, a decentralized ledger system that records all transactions made with the cryptocurrency.

A group of users known as ‘miners’ actively maintains this ledger, utilizing their computing power to validate and record transactions on the network.

Each miner operates a ‘node,’ a computer running the Bitcoin software and housing a record of all transactions ever processed on the Bitcoin network.

These nodes play a crucial role in maintaining the integrity and security of the blockchain, ensuring that all transactions abide by the set rules and regulations.

As of 2023, an estimated 17,195 nodes were operating on the Bitcoin network, each playing a part in ensuring the smooth and secure operation of the blockchain.

The Basics of Bitcoin Mining

Bitcoin mining actively brings new bitcoins into circulation and verifies transactions on the blockchain.

Miners use their computing power to solve complex mathematical problems, known as ‘proof of work.’

When a miner solves a problem, they actively add a ‘block’ of transactions to the blockchain and receive a preset number of bitcoins as a reward.

This reward, known as the ‘block reward,’ is vital in incentivizing miners to maintain the blockchain.

As of 2023, the block reward for miners is 6.25 bitcoins per block. However, this number is expected to decrease.Every 210,000 blocks, or approximately every four years, an event known as a ‘halving’ takes place, which halves the number of bitcoins rewarded to miners.

Defining Bitcoin Halving

A Bitcoin halving event is a significant happening within the Bitcoin ecosystem.

It is an inherent deflationary event that reduces the number of new bitcoins created and earned by miners. The halving event happens at intervals of 210,000 blocks, roughly every four years.

The next halving event, expected to occur around April or May 2024, will see the block reward fall from 6.25 to 3.125 bitcoins.

Bitcoin’s pseudonymous creator, Satoshi Nakamoto, coded the halving mechanism into the protocol to control inflation within the cryptocurrency’s ecosystem.

Predicting the Impact of the Next Bitcoin Halving

The upcoming Bitcoin halving event, expected to occur in 2024, has already begun generating much speculation and anticipation within the cryptocurrency community.

It’s important to note that while historical trends can provide some insight, they do not guarantee future outcomes.

The impact of the next halving event will depend on a wide range of factors, including the overall state of the global economy, advancements in Bitcoin mining technology, regulatory developments, and the prevailing sentiment among Bitcoin users and investors.

How Does Bitcoin Halving Influence Price Movements?

Historically, Bitcoin halving events have shown significant price movements. The reduced rate of new Bitcoin creation tends to create a supply shortage.

If demand remains steady or increases, this shortage can increase prices.

Following the halvings in 2012 and 2016, significant bull runs led to new all-time highs in the price of Bitcoin. However, as noted, past performance is not indicative of future results.

Many other factors, including broader market conditions, regulatory news, and technological advancements, also play a role in determining the price of Bitcoin.

Why Are Bitcoin Halvings Significant?

BTC halvings are significant for several reasons. Firstly, they reduce the rate of new Bitcoin creation, effectively limiting the cryptocurrency’s supply.

This key feature of Bitcoin’s design distinguishes it from traditional fiat currencies, which central banks can print in unlimited quantities.

Secondly, by reducing the miners’ rewards, halvings increase the cost of mining new BTC. This can lead to consolidation within the mining industry, as only those with the most efficient operations can remain profitable.

Finally, halvings generate much attention and speculation within the BTC community and the broader financial industry.

This can lead to increased trading activity and price volatility in the period leading up to and following the halving.

The Future of Bitcoin Mining Post-Halving

Despite the reduced rewards, BTC miners will unlikely shut down their operations en masse following the halving.

While the profitability of mining will decrease, the expectation of future price increases, combined with the transaction fees that miners earn, is likely to keep many miners in operation.

The block reward currently consists of both the new bitcoins created and the transaction fees from all transactions included in the block.

As halvings reduce the number of new bitcoins, transaction fees will become an increasingly important incentive for miners.

When Will All 21 Million Bitcoins be Mined?

The total supply of Bitcoin is capped at 21 million coins. By 2140, the last Bitcoin will likely be mined. Remarkably, over 98% of all Bitcoins will have been mined by 2030.

Miners will no longer receive block rewards once all 21 million bitcoins have been mined. However, they will continue to earn transaction fees as an incentive to keep the network secure and operational.

In Conclusion

Bitcoin halving events are a crucial part of the Bitcoin ecosystem. By understanding the when, why, and how of these events, you can better appreciate the innovative design of Bitcoin and the potential impact of halving its price.

The road to the next Bitcoin halving in 2024 will be a fascinating journey to observe. As always, it’s important to research and consider various factors before making any investment decisions.

Understanding the halving mechanism and its potential impacts can help you make more informed decisions about your Bitcoin investments. Consider this article for informational purposes only; it should not be regarded as investment advice.

Past performance does not indicate future results; every investment comes with risk. Always consult a financial advisor before making any investment decisions.

3. Marathon Digital Solidifies Position as World’s Largest Publicly Traded Bitcoin Miner

Marathon Digital Holdings (MARA) solidified its position in July as the world’s largest publicly traded bitcoin miner by self-mining hashrate, meaning computing power in its facilities that mines for its own wallets as opposed to those for clients.

In June, Marathon reported 17.7 exahash/second (EH/s) of operational computing power on the bitcoin network, also known as hashrate, outpacing the formerly largest public miner Core Scientific (CORZ), which had 15 EH/s of mining machines installed. Now in July, Marathon has reported a hashrate of 18.8 (EH/s), while Core Scientific has been bogged down in bankruptcy proceedings since December 2022. Core’s self-mining hashrate has remained largely unchanged since the month prior to its Chapter 11 filing.

Putting last year’s bad weather and operational delays behind it, Marathon has been plugging in machines at a rapid pace in 2023, almost tripling its operational hashrate to hit the 15 EH/s mark in May. Marathon’s stock price is up 360% in 2023, according to TradingView data, with the price of bitcoin rising about 76% year to date.

author avatar
Harvey CHEN

1 Comment

  1. 11/27/2023
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