The next Bitcoin halving is estimated to occur around 20 April 2024. These halving events happen roughly every four years, but the exact date can vary slightly due to minor fluctuations in block creation times on the Bitcoin network. Bitcoin halvings are incredibly significant because they directly impact the rate at which new Bitcoins enter circulation. When the next halving happens, the reward miners receive for successfully validating transactions and adding blocks to the Bitcoin blockchain will be cut in half from the current 6.25 BTC to 3.125 BTC. This mechanism is hard-coded into Bitcoin to enforce its finite supply – only 21 million Bitcoins will ever exist.
Halvings can potentially influence Bitcoin’s price due to increased scarcity. When new Bitcoins become harder to get, existing ones become proportionally more scarce. If demand for Bitcoin remains high or grows, this increased scarcity could lead to upward price pressure. Additionally, halvings help ensure the long-term security of the Bitcoin network by keeping the mining process profitable. This continued incentive keeps miners dedicating their resources, maintaining Bitcoin’s security and integrity.
Bloomberg reported yesterday that as the next Bitcoin halving event approaches, thousands of older mining computers in the US are set to be decommissioned for resale and relocation overseas. SunnySide Digital, a Colorado-based wholesaler, is preparing its facility to refurbish and export these machines to locations where electricity costs are significantly lower. With electricity being the primary expense for miners, publicly-traded giants like Marathon Digital Holdings (NASDAQ: MARA) and Riot Platforms (NASDAQ: RIOT) are under pressure to maximize efficiency for continued profitability. Older machines simply may not generate enough Bitcoin revenue to justify US operating costs. Taras Kulyk, CEO of SunnySide Digital, revealed they’ve sold machines to buyers in Ethiopia, Tanzania, Paraguay, and Uruguay. Luxor Technology estimates that around 600,000 S19 series machines, a widely used model, are being relocated overseas.
As Forbes reported last month, on February 15, the Ethiopian Investment Holdings (EIH), the government’s investment arm, signed a $250 million agreement with Hong Kong-based West Data Group’s Center Service PLC. This partnership aims to establish state-of-the-art infrastructure dedicated to Bitcoin mining and artificial intelligence. This landmark deal, as noted by Kal Kassa, CEO for Ethiopia at Hashlabs Mining, aligns with Ethiopia’s broader strategy to stimulate economic development through technology and attract foreign investment. With the African data center market projected to reach $5.4 billion by 2027 (according to Aritzon Advisory and Intelligence), Ethiopia is positioning itself for significant leadership in this sector.
Miners who choose to export their older machines often do so due to the allure of drastically lower energy prices, Bloomberg explains. This potential cost reduction becomes even more critical in the face of Bitcoin’s halving, which could make it unprofitable to operate less efficient machines in the US. Luxor Technology’s Ethan Vera believes buyers are strategically looking for the cheapest electricity possible.
Bloomberg notes that not all US-based miners sell their older machines. Some, like Nuo Xu, choose to physically relocate to areas with lower costs. Xu intends to explore options in Ethiopia, Nigeria, and other countries, hoping to cut operating expenses, including labor and building materials. Jaran Mellerud, CEO of Hashlabs Mining, echoes this sentiment, highlighting Ethiopia’s competitive hosting fees and increasing appeal to miners due to relaxed regulations.
Bloomberg acknowledges potential risks for US miners operating overseas, including machine damage during transport, security concerns, and the complexities of international logistics. Publicly traded companies also face stricter scrutiny from shareholders, making relocation more complex. Sam Tabar, CEO of Bit Digital Inc., exemplifies this by revealing their practice of keeping older machines in storage in case high Bitcoin prices make them temporarily profitable again.
Despite hurdles, the pre-halving upgrade cycle is in full swing. Bloomberg highlights that Bitcoin miners have been preparing for years. The 13 largest public mining companies have apparently invested over $1 billion in new machines since February 2023.
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