Hashrate

Thoughts on the Halving – Part 1

The Bitcoin Halving

David Bellman

Key Takeaway #1

We are monitoring the countdown to the next BTC halving, which is currently estimated for April 12 and will reduce the block reward to 3.125 BTC.

Key Takeaway #2

Unlike the previous halving, we are currently seeing institutional growth because of the recently-approved ETFs.

Key Takeaway #3

Surrounding previous halvings, we saw growth in BTC price 100 days out. If you halve production and prices do not respond, the hash rate could drop significantly as miners would have to turn their rigs off.

Key Takeaway #4

In our next report, we will dive into the impact of the halving on the relationship between equipment and revenue/MWh.

We are monitoring the countdown to the next BTC halving, which is currently estimated for April 12 and will reduce the block reward to 3.125 BTC. We plan to publish a series of reports leading up to this milestone in Bitcoin.

Looking at bitcoin from a traditional commodity perspective, we can of course observe the basic balance of demand and supply, with price playing a role to converge the two. The bitcoin halving will see a supply reduction via the production of bitcoin.In any modern times, a halving of any commodity supply would send shockwaves through the market and cause prices to move up.In the oil markets, a 2-5% supply disruption (for example, caused by reduced exports from Iraq, Iran, Venezuela, or Russia) would move prices over 5% in a day.When OPEC decides to cut or increase production, they can move prices by 10% even though their production only represents 34% of total supply.

Obviously, demand plays a large role in balancing any supply reduction in a commodity.Unlike the previous halving, we are currently seeing institutional growth because of the recently-approvedETFs (see slide 2), which is bringing new sources of demand.To put this growth potential in perspective, North American fiduciaries manage around $53 trillion in assets – so a 2% allocation would be significant organic growth, given BTC’s current market cap of ~$800 billion (see slide 3). Another perspective is to think about the total market cap of gold, which is close to $14 trillion. BTC is still in its infancy in terms of adoption (see slide 4). Another note related to BTC’s increased demand is the global growth of fiat currency volumes.For example, China is facing a financial crisis that it could try to resolve through further currency growth. BTC (like gold) offers a mechanism to respond to these currency dynamics.

Where do prices go in this scenario of ongoing demand growth?Surrounding previous halvings (see slide 5), we saw growth in BTC price 100 days out. If you halve production and prices do not respond, the hash rate could drop significantly as miners would have to turn their rigs off. Historically during past halvings, we did see an initial drawdown in hash (see slide 6), but miners can sustain themselves if they find lower power prices and/or have better equipment – with the later option of course costing more capital. Those miners with power prices north of $70/MWh will have a hard time being competitive without better equipment (see slide 7).At some point, prices would have to rise to balance this conundrum unless BTC demand falls. However, this situation is unlikely in the current demand environment.

In our next report, we will dive into the impact of the halving on the relationship between equipment and revenue/MWh.

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We are monitoring the countdown to the next BTC halving, which is currently estimated for April 12 and will reduce the block reward to 3.125 BTC. We plan to publish a series of reports leading up to this milestone in Bitcoin.

Looking at bitcoin from a traditional commodity perspective, we can of course observe the basic balance of demand and supply, with price playing a role to converge the two. The bitcoin halving will see a supply reduction via the production of bitcoin.In any modern times, a halving of any commodity supply would send shockwaves through the market and cause prices to move up.In the oil markets, a 2-5% supply disruption (for example, caused by reduced exports from Iraq, Iran, Venezuela, or Russia) would move prices over 5% in a day.When OPEC decides to cut or increase production, they can move prices by 10% even though their production only represents 34% of total supply.

Obviously, demand plays a large role in balancing any supply reduction in a commodity.Unlike the previous halving, we are currently seeing institutional growth because of the recently-approvedETFs (see slide 2), which is bringing new sources of demand.To put this growth potential in perspective, North American fiduciaries manage around $53 trillion in assets – so a 2% allocation would be significant organic growth, given BTC’s current market cap of ~$800 billion (see slide 3). Another perspective is to think about the total market cap of gold, which is close to $14 trillion. BTC is still in its infancy in terms of adoption (see slide 4). Another note related to BTC’s increased demand is the global growth of fiat currency volumes.For example, China is facing a financial crisis that it could try to resolve through further currency growth. BTC (like gold) offers a mechanism to respond to these currency dynamics.

Where do prices go in this scenario of ongoing demand growth?Surrounding previous halvings (see slide 5), we saw growth in BTC price 100 days out. If you halve production and prices do not respond, the hash rate could drop significantly as miners would have to turn their rigs off. Historically during past halvings, we did see an initial drawdown in hash (see slide 6), but miners can sustain themselves if they find lower power prices and/or have better equipment – with the later option of course costing more capital. Those miners with power prices north of $70/MWh will have a hard time being competitive without better equipment (see slide 7).At some point, prices would have to rise to balance this conundrum unless BTC demand falls. However, this situation is unlikely in the current demand environment.

In our next report, we will dive into the impact of the halving on the relationship between equipment and revenue/MWh.

‍

BTC ETFs

Broadening Exposure

‍

BTC Market Cap

Over Time

BTC Adoption Curve

Still in its Infancy

‍

BTC Price & Prior Halvings

Price Generally Increases, But Sample Size Only n=3

Hash Rate

Bitcoin Power Cost Curve

Disclosures

Purpose

This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.

Analyst Certification

David Bellman, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.

Conflicts of Interest

This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.

General Disclosures

Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or throughhttp://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such.BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.

The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.

All derivatives brokerage is conducted byOoda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.

BitOoda Technologies, LLC is a member of FINRA.

“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.

‍

We are monitoring the countdown to the next BTC halving, which is currently estimated for April 12 and will reduce the block reward to 3.125 BTC. We plan to publish a series of reports leading up to this milestone in Bitcoin.

Looking at bitcoin from a traditional commodity perspective, we can of course observe the basic balance of demand and supply, with price playing a role to converge the two. The bitcoin halving will see a supply reduction via the production of bitcoin.In any modern times, a halving of any commodity supply would send shockwaves through the market and cause prices to move up.In the oil markets, a 2-5% supply disruption (for example, caused by reduced exports from Iraq, Iran, Venezuela, or Russia) would move prices over 5% in a day.When OPEC decides to cut or increase production, they can move prices by 10% even though their production only represents 34% of total supply.

Obviously, demand plays a large role in balancing any supply reduction in a commodity.Unlike the previous halving, we are currently seeing institutional growth because of the recently-approvedETFs (see slide 2), which is bringing new sources of demand.To put this growth potential in perspective, North American fiduciaries manage around $53 trillion in assets – so a 2% allocation would be significant organic growth, given BTC’s current market cap of ~$800 billion (see slide 3). Another perspective is to think about the total market cap of gold, which is close to $14 trillion. BTC is still in its infancy in terms of adoption (see slide 4). Another note related to BTC’s increased demand is the global growth of fiat currency volumes.For example, China is facing a financial crisis that it could try to resolve through further currency growth. BTC (like gold) offers a mechanism to respond to these currency dynamics.

Where do prices go in this scenario of ongoing demand growth?Surrounding previous halvings (see slide 5), we saw growth in BTC price 100 days out. If you halve production and prices do not respond, the hash rate could drop significantly as miners would have to turn their rigs off. Historically during past halvings, we did see an initial drawdown in hash (see slide 6), but miners can sustain themselves if they find lower power prices and/or have better equipment – with the later option of course costing more capital. Those miners with power prices north of $70/MWh will have a hard time being competitive without better equipment (see slide 7).At some point, prices would have to rise to balance this conundrum unless BTC demand falls. However, this situation is unlikely in the current demand environment.

In our next report, we will dive into the impact of the halving on the relationship between equipment and revenue/MWh.

‍

BTC ETFs

Broadening Exposure

‍

BTC Market Cap

Over Time

BTC Adoption Curve

Still in its Infancy

‍

BTC Price & Prior Halvings

Price Generally Increases, But Sample Size Only n=3

Hash Rate

Bitcoin Power Cost Curve

Disclosures

Purpose

This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.

Analyst Certification

David Bellman, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.

Conflicts of Interest

This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.

General Disclosures

Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or throughhttp://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such.BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.

The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.

All derivatives brokerage is conducted byOoda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.

BitOoda Technologies, LLC is a member of FINRA.

“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.

‍

Related Research

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The Bitcoin Halving: Price and Hashrate Implications for the rest of 2023

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Premium Content

Table of contents

Research By

BTC ETFs

Broadening Exposure

BTC Market Cap

Over Time

BTC Adoption Curve

Still in its Infancy

BTC Price & Prior Halvings

Price Generally Increases, But Sample Size Only n=3

Hash Rate

Bitcoin Power Cost Curve

Disclosures

Table of contents

Research By

BTC ETFs

Broadening Exposure

BTC Market Cap

Over Time

BTC Adoption Curve

Still in its Infancy

BTC Price & Prior Halvings

Price Generally Increases, But Sample Size Only n=3

Hash Rate

Bitcoin Power Cost Curve

Disclosures

Related Research

The Bitcoin Halving: Price and Hashrate Implications for the rest of 2023