Miner capitulation may lead to Bitcoin's plight? Professionals don't think so.

While most people in the market are aware that the halving of Bitcoin production will alter the market supply of Bitcoin and consequently affect its price, Blockware Solutions, a service provider focusing on blockchain infrastructure and cryptocurrency mining, points out that the halving event will potentially serve as a catalyst for the increase in Bitcoin price due to changes in miner capitulation and demand side.

Bitcoin Becomes the Center of Attention

It is well known that the price of Bitcoin is more volatile than traditional assets, and this volatility has been particularly pronounced in the past one or two months. After reaching a high of $10,000 in mid-February 2020, the price of Bitcoin dropped below $5,000 in the following month. Since hitting bottom, the price has rebounded to around $7,300.

This extreme price volatility has left many investors curious about the future of Bitcoin, especially in light of the U.S. government's issuance of a large amount of fiat currency in response to the COVID-19 pandemic. Former Facebook executive Chamath Palihapitiya recently stated that in such market conditions, there is a 5% to 10% chance that Bitcoin could reach a value of one million dollars. However, earlier this year, Tesla CEO Elon Musk expressed disbelief that such cryptocurrencies could become mainstream currencies globally. Additionally, Bridgewater Associates founder Ray Dalio believes that in the face of a potential crisis in global fiat currencies, investors will turn to gold rather than Bitcoin.

On the other hand, as the date of Bitcoin's third halving event in history approaches, the possibility of another halving rally is one of the most discussed topics in the current market. In a recent report released by Blockware Solutions, the potential factors affecting the price of Bitcoin post-halving are extensively explored. Recently, Blockware Solutions CEO Matt D’Souza also shared his views on the halving event in an interview.

Miner Surrender Benefits Bitcoin Price

While most people in the market are aware that the halving of Bitcoin production will change the market supply of Bitcoin, thereby affecting its price, Blockware Solutions believes that the impact of Bitcoin halving on its price goes beyond just changes in the supply side.

In the report, Blockware Solutions points out that besides reducing the supply of Bitcoin, halving also means that most of Bitcoin's production capacity will shift to more powerful and efficient miners. D’Souza stated:

"The halving will eliminate inefficient miners. When they exit the market, their rewards will indirectly be distributed to more efficient miners, those who deploy correctly and have low electricity costs. These are the top miners, and we would rather see Bitcoin fall into their hands because they have high profit margins, do not have to sell too much Bitcoin to survive in the market, and the selling pressure in the market will decrease, potentially causing the price of Bitcoin to rise."

However, D’Souza subsequently added that before inefficient miners surrender, there may be a period of pain for the Bitcoin price. Some miners may be bound by commercial contracts that force them to operate at a loss for a period of time. D’Souza stated:

"These miners who are forced to operate at a loss will create greater selling pressure because all the Bitcoin they mine must be sold. They may even have to sell their own funds (Bitcoin), creating even greater selling pressure."

D’Souza believes that if Bitcoin's price remains at the current level after halving, inefficient miners may take two to three months to be eliminated from the network.

Other Factors Affecting Bitcoin Price Post-Halving

In addition to eliminating inefficient miners post-halving, D’Souza further pointed out that the "demand side" could be another important factor that could affect the price of Bitcoin post-halving. D’Souza said:

"Everyone knows that halving production is usually bullish, people know that the economics of the supply side will improve, so this will improve the confidence of the demand side in the system."

On the other hand, as the overall market is bullish, miners will leverage their earned Bitcoin to earn passive income, which should further alleviate selling pressure on the network. When miners can borrow against their held Bitcoin to obtain fiat currency, they no longer need to sell a large amount of Bitcoin to pay bills.

Related Readings

• Understanding Miner Behavior Game Theory in Bitcoin Halving
• Only 32 Days Left Until Bitcoin Halving! Most Major Exchanges Optimistic About Post-Halving Market
• Can't Wait for the Halving Effect? China's Top Mining Pool "BytePool" Reportedly Exiting

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