We are now a few hours (36 blocks away at press time) away from the long-awaited halving of block rewards on the Bitcoin network.
However, while that milestone is definitely one to savor for most Bitcoin enthusiasts, it could possibly trigger a period of huge miner capitulation, especially if the price of the cryptocurrency fails to rally significantly in days preceding the halving.
According to statistics provided by Charles Edwards, Market Researcher at Capriole Investments, the current Bitcoin prices leading up to the halving could send many miners packing, since the conditions are unfavorable when compared to the previous halving events.
The study reportedly takes into account, The Cambridge Bitcoin Electricity Consumption Index (CBECI) and the Coinshares global average Mining electrical cost estimates.
Precisely, a halving of block rewards in the next few hours is expected to raise the production cost for miners to $14,000, a whopping 70% increase if the price of Bitcoin stays below $9,000. Such an increased production cost would mean that miners expend more money to generate new units of bitcoins, and small miners will likely head for the exit doors if price fails to rally.
Putting the anticipated increase into perspective, Edwards notes that during the 2016 halving, the price was just 10% below the production cost for miners, while the price of Bitcoin and the network’s hash rate collapsed by 20% in the aftermath of the halving.
With miners bracing up for the unknown, the price of Bitcoin at press time has started to recover from a weekend capitulation that saw it drop to as low as $8470.