- The upcoming Bitcoin (BTC) halving could lead to the exit of small miners according to Bitfinex.
- This could result in the centralization of Bitcoin mining, which is contrary to the premier cryptocurrency’s ethos.
Small Bitcoin Mining Firms May Close Shop Post-Halving
For investors, the halving marks another cycle that could propel BTC to new heights. It marks a renewed hope for another bull run as supply for the digital currency tightens amid the growing institutional demand. However, this event may not bode well for small players in the Bitcoin mining sector.
Early on, Riot Platforms posted a bleak outlook on the future of Bitcoin mining past the halving. It said there would be “no guarantee” that it would result in positive changes in terms of the company’s profitability. And that’s even coming from one of the largest institutions in the industry, so just imagine what lies ahead for smaller players.
A recent report from Bitfinex piled into the worries of these entities as it just posted a forecast that the halving in Bitcoin’s ecosystem may force smaller miners to exit in droves. The ensuing scenario could mean the consolidation of mining power in larger companies, which could ultimately deconstruct the decentralized framework originally envisioned by the pseudonymous Satoshi Nakamoto that has defined Bitcoin over the years.
Deconstructing Bitcoin’s Decentralization
For Bitfinex, the concentration of power could potentially lead to censorship of transactions as well as exploits within the Bitcoin network. It could likewise increase its exposure to regulatory pressures.
“Centralization risks could mean the potential censorship of transactions and increased vulnerability to coordinated attacks or regulatory pressures,” said the world’s longest-running crypto exchange.
Nevertheless, Bitfinex expressed optimism that the block reward reduction past the halving would still enable sustainable operations for miners. The subsequent scarcity amplified by rising institutional demand could trigger higher prices for the Fiat currency conversion of Bitcoin.
“If the price of Bitcoin rises sufficiently, it could offset the reduced block reward, maintaining or even increasing mining profitability,” noted the exchange. “This price appreciation is critical for encouraging continued investment and participation in mining activities.”
Bitcoin Now
At the time of writing at 1:20 PM UTC on Monday, Bitcoin continues to hover around the $68,000 mark with a 1.3% increase in its value over the 24-hour period. This is, however, 7% lower than the all-time high of $73,750.07 it achieved four days ago, but is still 31% higher in the monthly frame and 146% up on the one-year frame.
There remains confidence that BTC will resume its climb to new all-time highs after the halving based on historical data paired with the growing interest of institutions toward the digital asset.