AnalysisMining

BTC price effect on the mining industry



2020 was a year that many miners were fearing. They knew that a new Bitcoin Halving was coming, which meant that they would be getting half of what they were getting but having to use the same time and effort to produce it.

In March, two months before the Halving, an unexpected crisis fell over the world, affecting the financial system and the economy in every country.

The COVID-19 forced the governments to apply a lockdown that made the companies close their doors and send their workers home to be safe.

Like every industry around the globe, cryptocurrency market suffered from this crisis, which led to a crash of Bitcoin price, which achieved 10.000 USD in February but fell to the bottom at the beginning of the following month.

However, now that the BTC price has reached once more the 10K, small and great Bitcoin miners are recovering from the hard losses, wondering what does the future await for them.

The BTC mining industry

Bitcoin appeared on the network in 2008 and was the first cryptocurrency created. This digital coin is obtained or mined from data blocks constructed whenever there is an online transaction.

This technology is called Blockchains, and it allows creating a decentralized financial system, where traders won’t need a third party to validate the deals with other traders.

The type of mining that Blochain uses is the PoW or Proof-of-Work. It means that to be able to obtain the digital currency, the miners have to go through the algorithms of the blockchains, breaking through them to find a code until the miners create a complete key that allows them to open the block where they can find a chunk of Bitcoin.

This process is a safe way to make a profit, but at the same time, consumes many elements. Miners need to spend some money to create an appropriate environment for their mining farms.

The miners connect many mining machines, which need to stay on all day. It means they have to invest in power source to avoid light problems and keep the devices fresh.

Miners also need to invest in the location, preferably in places where the price of electricity is lower, and the light power is stable. The more machines a miner can afford, the more profits that miner can get.

Halving

Bitcoin halving is a measure that the executive owners of Bitcoin took to prevent the mining of the cryptocurrency from being over soon. There can be only a specific amount of Bitcoin in circulation, which means that this cryptocurrency has a limit.

Every four years, the amount a miner can get of Bitcoin every time it manages to open one of the blocks is halved. So far there have been three halvings, the first two in 2012 and 2016 respectively, and the latest one in May 2020.

Although this measure allows that miners would be able to keep mining for many years before the asset is over, it also means that they would be getting half of the profit they used to gain, but they would have to use the same investment.

Great miners can afford these changes, although it may represent losses in the first months after the Halving. For the small miners, however, it could make them evaluate if it is worth it to keep mining if the gainings are going to be lower than the losses.

BTC price over 10k

The crash of March in the Bitcoin market added a new fear to miners, especially the smaller ones, who saw this fall right before the Halving as an irreversible failure of the Bitcoin system.

A lot of people was sure it was going to be impossible for the cryptocurrency to recover from that. Once the experts made the calculations, the expenses needed to continue mining was not going to be worth the effort.

Many traders and investors started to look at the possibilities of alternative cryptocurrencies, and some began to try these other digital currencies. However, as predicted by some smart analysts, the price of Bitcoin rose again and achieved once more the 10.000 USD value.

This achievement affects both the small and the great mining companies significantly, as BTC price continues to increase.

For small and big BTC mining farms, the increase of the price gives them the boost they needed to continue on the mining industry.

Even though the amount of Bitcoin they are collecting is less than before the Halving, the high price of Bitcoin proves that this activity is still profitable and that the gains are as good as they were before.

Experts predict a Bullish run in the trade market, which means that they believe that the price of Bitcoin will keep increasing this year, probably hitting the 16k before the year finishes.

Conclusion

Bitcoin mining was on edge these few months, a period that other cryptocurrencies took advantage of to try and get the lead on the digital currency race to the top.

However, the sudden rise on the prices in Bitcoin helped the miners to continue their work, something they doubted they would be able to do after the COVID-19 crisis and the Halving.

The price of the Bitcoin needs to keep growing if miners want to benefit from that activity. As long as the value of this cryptocurrency is high, the profits that great and small miners can get is better.

It can also get the interest of other investors and companies that would start putting their money on mining farms to gain more of this cryptocurrency.

Some experts are predicting that before the year finishes, there may be a second lockdown. However, this time miners will be more prepared, so there are people making preparations to that day, knowing that there can be a second crash in the market.

They also believe that, as it happened this time, Bitcoin would be able to recover in short notice, allowing the miners to keep gaining profit from their mining farms before too long.

Image source: Flickr



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