Ki Young Ju predicted higher mining costs after halving, Bitcoin stability despite shifting transact
After posting record-breaking earnings on Bitcoin BTC $64,987 halving day, miners now face another reality, with a high network hash rate and lower revenues pushing down profits.The average revenue a miner earns per performed hash, known as the hash price, has reached its lowest level since October 2023. According to crypto analytics firm CryptoQuant, the hash price for miners dropped from nearly $0.12 in early April to $0.07 post-halving, following a $0.19 peak on halving day.
Bitcoin’s halving event slashed miners’ block reward from 6.25 BTC to 3.125 BTC, while the sector’s operational costs remain steady. CryptoQuant’s CEO, Ki Young Ju, estimated that the cost of mining with Antminer S19 XPs would increase from $40,000 to $80,000 following the halving.
Bitcoin hash price. Source: CryptoQuant
Despite the reduction in rewards, the total network hash rate has remained stable since the halving event, suggesting that BTC mining is still profitable at Bitcoin’s current prices. Cointelegraph Markets Pro shows Bitcoin holding above the $64,000 mark since April 19.
“Although it is still too early to see any long-term effects of the halving on the network hashrate, miners seem to be running operations at the same rate as before the halving,” CryptoQuant noted in a report, as the total network hash rate held flat at 617 EH/s post-halving.
On the day of the halving, transaction fees reached record levels relative to the total revenue generated by miners. Transaction fees represented 75% of total miner revenue on the halving day, which amounted to roughly $80 million. Since then, it has dropped to about 35% of total miner revenue.
While the immediate effects show stability, the long-term impacts on the hash rate and overall miner activity could still change. In the past, post-halving periods have seen miners exit the market due to high operational costs. Factors like Bitcoin price movements and changes in electricity costs are likely to play crucial roles in the mining business.
Bitcoin and crypto investors will have a “golden opportunity” to buy the dip in the coming months, said industry OG Arthur Hayes.
In his latest blog post, “Left Curve,” released on April 24, the former CEO of crypto exchange BitMEX forecasted that the crypto bull market would continue.
Hayes: Bitcoin is "hardest money ever created"
Bitcoin's has come and gone, and crypto markets are booming versus the U.S. dollar and other fiat currencies.This, Hayes said, is no coincidence — governments worldwide will keep printing money to manage their debt burdens, and their currencies will lose out against Bitcoin and altcoins.
“Bitcoin is the hardest money ever created. If you sold shitcoins for fiat that you don’t immediately need for living expenses, you are fucking up. Fiat will continue to be printed ad infinitum until the system resets.”
“If you sold shitcoins for Bitcoin, you get a pass,” he told readers.
Hayes is no stranger to predicting the collapse of fiat-based economies, including that of the United States.
2024 is an election year for the United States, so the impetus to expand the money supply is even more apparent because politicians’ popularity effectively depends on it, he said.
“The undecided voters who determine the electoral winners do so based on how they feel about the economy,” he wrote alongside a chart from global macro research firm BCA Research.
“As the above chart depicts, an incumbent President’s re-election odds drop from 67% to 33% if the general population feels the economy is in a recession during an election year.”
U.S. election odds (screenshot). Source: Arthur Hayes/Medium
Hayes concluded that regardless of who wins the U.S. presidential election, the printing will accelerate. Crypto traders should be prepared for fiat devaluation by buying the dip, as it should ignite the powder keg for a rampant crypto bull market.
“Whatever the flavour of crypto risk excites you, the next few months will present a golden opportunity to add to positions,” the post summarizes.
The road to $1 million BTC price remains
As Cointelegraph reported, Bitcoin is already in the spotlight as a lifeline against fiat inflation.
With a strong U.S. dollar pummeling emerging market currencies this year, the phenomenon has not gone unnoticed. Earlier this month, Cathie Wood, CEO of asset manager ARK Invest, made the case for Bitcoin as a hedge against “horrible fiscal and monetary policies.”
“I think this is a flight to safety, believe it or not, taking place,” she told mainstream media.
“A hedge against devaluation, a hedge against a loss of purchasing power and wealth.”
While Hayes did not give an updated BTC price target, he suggested that the path from $70,000 to $1 million for BTC/USD may not be as difficult as its history rising from zero.
“Rarely in markets do the things that got you here (Bitcoin from zero in 2009 to $70,000 in 2024), get you there (Bitcoin to $1,000,000),” he acknowledged.
“However, the macro setup that created the fiat liquidity surge that powered Bitcoin’s ascent will only get more pronounced as the sovereign debt bubble begins to burst.”
Grayscale Investments is taking a page from the playbook of its biggest bitcoin ETF competitor with its “Mini,” cheaper version of GBTC.
While this strategy may not work as well as BlackRock’s past comparable actions in other ETF segments, the new Grayscale fund could gain assets quickly, industry watchers said.
Grayscale’s status in the bitcoin ETF category is a bit nuanced.
The crypto asset manager won a court case against the Securities and Exchange Commission last year that helped lead to the regulator’s approval of such funds.
On top of that, the company’s Bitcoin Trust ETF (GBTC) has the most assets under management — at least for now.
BlackRock’s ever-growing iShares Bitcoin Trust (IBIT) had about $18.2 billion in assets as of Tuesday, which was second only to GBTC’s asset base of $20.2 billion. The Fidelity Wise Origin Bitcoin Fund (FBTC) has roughly $10 billion in assets.
That said, investor money continues to leave GBTC, which holds a higher-than-competitors’ fee of 1.5%. The fund has notched net outflows on every trading day since converting to an ETF on Jan. 11 — amounting to $16.8 billion, according to Farside Investors data.
Now, Grayscale is proposing to launch a Bitcoin Mini Trust (BTC) — and yes, that’s the correct proposed ticker.
As part of a “spin off” mechanism unique to commodity ETFs, GBTC would seed BTC, according to Grayscale. A percentage of the flagship fund’s bitcoin holdings would be allocated to the new offering, the company added.
Grayscale is also seeking to offer two types of ether ETFs with similar differences, the company said in a Tuesday blog post.
Understanding the strategy
Why launch a totally new fund instead of just lowering GBTC’s 1.5% fee?
A Grayscale spokesperson did not immediately return a request for further comment on the strategy.
But segment observers have noted the wider set of allocators Grayscale can appeal to by adding another fund.
Neena Mishra, director of ETF research at Zacks Investment Research, noted that GBTC could remain popular with traders due to its liquidity, while BTC will be favored by long-term, buy-and-hold investors.
“At some point GBTC’s bleeding will stop, as a significant portion of its assets is reportedly in taxable accounts,” she told Blockworks. “Grayscale can therefore use GBTC’s revenues to subsidize BTC.”
Ben Johnson, Morningstar’s head of asset management client solutions, addressed this type of strategy in a December 2017 research note about a separate fund segment.
BlackRock’s iShares MSCI Emerging Markets ETF (EEM) launched in 2003. Rival fund group Vanguard came out with a much cheaper fund offering exposure to emerging markets stocks — the Vanguard FTSE Emerging Markets ETF (VWO) — about two years later.
In response to Vanguard undercutting EEM — albeit years later after EEM lost significant ground to VWO — BlackRock in 2012 debuted the iShares Core MSCI Emerging Markets ETF (IEMG). The fund, which tracked a broader index, was priced at 0.18%, compared to EEM’s 0.68%.
The launch of IEMG was “effectively an attempt by BlackRock to have its cake and eat it, too,” Johnson wrote at the time.
“Rather than slashing the fee on its existing multibillion-dollar fund and forgoing millions in fee revenue, it was splitting its current and prospective clientele in two,” he added. “Long-term investors tend to have a strong preference for broad diversification and low fees. Short-term traders command greater liquidity.”
Today, the first, more expensive emerging markets ETF, EEM, has $16.6 billion assets under management, according to ETF.com data. IEMG and VWO each have roughly $74 billion in assets.
Similarly, BlackRock launched the iShares MSCI EAFE ETF (EFA) in 2001 before launching the cheaper iShares Core MSCI EAFE ETF (IEFA) in 2012. EFA, which today has an expense ratio of 0.35%, has $50.8 billion in assets. IEFA, which carries a 0.07% fee, manages $110.8 billion.
While not quite as successful as IEMG and IEFA, a “mini” version of the first physically backed gold ETF gained significant assets.
State Street Global Advisors, which launched SPDR Gold Shares (GLD) in 2004, brought to market a cheaper SPDR Gold MiniShares Trust (GLDM) in 2018. GLD and GLDM have $63.6 billion and $7.6 billion assets under management.
Could Grayscale see similar results?
Johnson told Blockworks that he doesn’t expect this strategy to be nearly as successful for Grayscale as it was for BlackRock.
The historical success for the world’s largest asset manager was due to “cleanly segmenting its clients” into two categories: benchmark-sensitive, liquidity-demanding owners of a fund like EEM and price-conscious buyers of the cheaper alternative, he explained.
“In the case of GBTC and BTC, there are already abundant low-cost options with significant assets under management and oodles of liquidity — all of which offer exposure to the exact same asset,” Johnson added.
Still, Mishra pointed to GLDM’s ability, for example, to gain billions of dollars in assets. A cheaper version of Invesco’s QQQ has $22 billion — a high mark that she called “very successful” despite representing less than 10% of the assets in QQQ.
“It is quite likely that BTC will also be able to quickly gather assets,” Mishra added. “Furthermore, it will be seeded with a portion of GBTC’s assets.”
Grayscale gave BTC a hypothetical sponsor fee of 0.15% based on unaudited pro forma financial statements, according to a recent filing. Such a fee would make it the cheapest spot bitcoin ETF available, barring temporary fee waivers.
“While a few [basis points] worth of fee edge versus the incumbents certainly can’t hurt BTC,” Johnson said, “it’ll be playing catchup with the IBITs and FBTCs of the world who have gotten a big head start.”
