Pursuant to a brief conversation I had today in the subscriber Telegram chat, I thought it interesting to write some thoughts on how the Halving will affect Bitcoin miners. One of our subscribers asked if this Halving would be a positive event for miners and mining stocks. After considering it, I think the Halving could instead be bearish for the stocks.

Miners have traditionally done well during past Halvings. When we chart miners’ total revenue in USD vs the price of Bitcoin, the chart looks identical. The identical chart tells me the Halving has benefited miners because the Halving has traditionally coincided with a drastic BTC price rise. So, even though Bitcoin halved its rewards, the ensuing price appreciation made up for it. As such, if the Halving has the same effect on the price of BTC, then the Halving could be a boon for miners.

However, just because something happened in the past doesn’t mean it will repeat. I am less sure this halvening will be a positive event for miners. This Halving will drop the daily BTC rewards from around 900 BTC to 450 BTC. That’s a significant hit. If this Halving has less of an effect on the price of Bitcoin than prior ones, I think miners could be in trouble. The Halving is almost like a business losing half of its customers but betting on charging the remaining half more to cover the loss of the others, it may work for a little while, but it is hardly sustainable.

Of course, if Bitcoin had significant fees to replace the loss of block rewards, I would be less worried for miners. But as I am sure readers know, Bitcoin fees leave much to be desired and are often a tiny portion of miner revenue – sometimes less than 1%. Readers can see from the chart above that Bitcoin fees are sporadic at best and rarely rise to the same level of revenue for miners as the block reward.

Ordinals and inscriptions have been helping with Bitcoin’s fees – but they are not a silver bullet. In general, inscription fees are below 20% of Bitcoin’s fee landscape – this is still a significant amount of funds, but it will not make too much difference to miners who are used to getting hundreds of BTC per day. Additionally, the increase in fees caused by inscriptions could reduce transactional volume as fees become onerous.

That said, I would be cautious about shorting mining stock. Mining stock could easily catch a bid as a spillover from crypto enthusiasm that’s beyond any sort of fundamentals. The reasoning is simple: miners’ earnings should go up if the price of crypto goes up. Digging into the data around mining profitability is probably too arcane for some, and they will bid regardless. However, miners could lose the bid of those seeking general crypto exposure if the SEC approves spot BTC ETFs.

Of course, if a new bull kicks off in earnest and the price of BTC skyrockets to 100K+ per coin, miners will do fine, even with the reduction in block rewards. But, this does only seem to delay the inevitable for miners. At some point, fees will have to overtake the block rewards, and if not, Bitcoin will become much less secure and miners a lot less profitable.