Ethiopia, Nigeria, Kenya, Argentina, and Paraguay could see higher hash rates in the upcoming years, according to Jaran Mellerud, co-founder of Hashlabs Mining and chief mining strategist.

The share prices of expensive public miners in the US could collapse due to a potential slowdown in Bitcoin prices following the halving, pushing some of them to relocate abroad.

“If the price of Bitcoin BTC tickers down to $50,885 after the halving, we might see a mining stock blood bath as investors realize these companies are barely making money,” says Hashlabs Mining founder and chief mining strategist Jaran Mellerud.

Mellerud is currently focusing on the three- to four-month period following the halving to gauge how much the reduction in block rewards will affect miner profitability.

Based on CoinMarketCap, the next Bitcoin halving is scheduled for April 24. It will lower Bitcoin miner incentives from 6.25 BTC ($321,000) to 3.125 BTC ($160,500), yet historically, a spike in the price of the cryptocurrency has followed.

When Bitcoin was last halved on May 11, 2020, it was worth $8,750. Five months later, in October, it was worth approximately 430% more, rising from $11,500 to $61,300 by mid-March 2021.

However, “a significant part of the network might have to turn off their machines, particularly those paying to host rates of $0.07 per kWh or more,” Mellerud said, adding that a large concentration of these inefficient miners is located in the United States if Bitcoin fails to make a significant run before that three to four-month interval.

Mellerud predicts that as a result, a portion of Bitcoin’s hash rate will move from the United States to nations with lower electricity prices, namely in Africa and Latin America.

“US-based miners who wish to relocate their computers to Ethiopia, where hosting fees are 30–40% lower than in the US, are currently putting a lot of pressure on my company, Hashlabs.”

When Cantor Fitzgerald revealed in late January that 11 miners of the cryptocurrency that are publicly listed would not mine profitably after the price halving if Bitcoin stayed at $40,000 (the price of Bitcoin at the time), profitability concerns reappeared.

The entire cost a Bitcoin miner would pay in creating a single Bitcoin, including electricity costs, hosting fees, and other monetary charges, is referred to as Cantor Fitzgerald’s “all in per coin” statistic.

However, only four of the 13 mining companies are currently profitable, with Bitcoin trading at $51,000.

The majority of American public miners, particularly those that purchased more effective equipment during the wrong market, would, according to Mitchell Askew, lead analyst at Bitcoin mining company Blockware Solutions, operate at low enough electricity costs to be profitable, Cointelegraph said.

Askew refuted Mellerud’s claim that the majority of ineffective miners are located in the United States, claiming that their proportion of Bitcoin’s overall hash rate is negligible. Consequently, any loss of hash rate in the United States would be minimal.

Even in the case of unprofitability, Askew claims that American miners won’t relocate abroad for a few reasons.

While some mine only to stack non-Know Your Customer Bitcoin and are less concerned with profitability, Askew stated that “many of them are locked into a fixed hosting contract in which they must continue to mine regardless of profitability.”

If a mining migration event occurs, Mellerud claimed that Ethiopia, Nigeria, and Kenya are the best-positioned African nations to take home a more significant portion of the hash rate.

According to Mellerud, Ethiopia, in particular, has a “massive hydropower surplus” and is seeing several Chinese miners go there to mine. Over the coming years, Mellerud predicts that Ethiopia will account for 5–10% of the global hash rate of Bitcoin.

According to Mellerud, South America’s nations with the most potential for mining are Paraguay and Argentina.

Conclusion

The specter of the Bitcoin halving ‘blood bath’ looms large over the US mining industry. As the event draws near, US miners face a daunting landscape of reduced rewards, heightened expenses, and vanishing profit margins. The offshore migration of mining operations serves as a poignant example of the challenges and opportunities confronting the cryptocurrency community in the wake of this seminal event.

Key stakeholders, from government officials to industry leaders, must collaborate to forge a path forward that preserves the integrity and vitality of the mining sector. The lessons learned from the halving and its aftermath will undoubtedly shape the future of both Bitcoin and the broader cryptocurrency market.