A popular narrative revolving around the Bitcoin (BTC) halving is that it may trigger the capitulation of miners. But, information technology is premature to suggest many miners will close down in 2022 and bring the price of cryptocurrencies down as a result.

Some manufacture executives believe that the price of Bitcoin may drop following the May eleven halving. After the cake rewards of Bitcoin miners get cut in half, their revenues also drop substantially. Typically, it affects overleveraged and small miners, forcing them to shut down their machines.

Digital Asset Manager Charles Edwards said:

This volition be the most brutal Bitcoin Halving in history. Production cost is almost to double to $fourteen,000. lxx% to a higher place the current price. During the last halving, the price was just 10% beneath Product toll, and Price & HR collapsed -twenty%. Without FOMO now, look a big miner capitulation. xxx%+

A widespread theory is that as miners capitulate, they will begin to sell Bitcoin in the cryptocurrency exchange market and add pregnant selling pressure level, which leads to more than miners leaving and and so on, resulting in the mythical "mining decease screw."

This twelvemonth, there are many variables that may prevent such a trend from occurring. Four primary arguments confronting the capitulation of miners are: cheaper electricity in Red china decreased operational expenses due to weaker currencies, drib in energy cost due to regime lockdowns worldwide, and the adjustment of mining difficulty.

Miners continued to hoard Bitcoin ahead of halving, expecting a price increase

Miners continued to hoard Bitcoin ahead of halving, expecting a cost increase. Source: Bytetree

Cheaper electricity in Communist china & less demand for energy worldwide

Cathay reportedly comprises roughly 65% of all Bitcoin computing ability, according to the latest information.

Moreover, the Chinese province of Sichuan is presently to enter the rainy season. Many electricity service providers in the province rely on hydropower to generate energy. When there is an abundance of water, it allows hydro plants to generate more energy than usual.

The increment in the supply of electricity in Sichuan gives large-scale mining centers in the region the ability to negotiate electricity prices. For the adjacent few months, big miners are likely to receive major discounted electricity rates, decreasing operational costs.

Worldwide implementation of stay-at-dwelling house measures and strict lockdowns further decrease the level of electricity usage. Major factories and millions of small businesses remained closed for around two months.

Low electricity rates, record low global oil prices and the trend of manufacture-leading mining firms to maintain a large cash buffer tremendously reduce the run a risk of miner capitulation.

Weaker currencies event in lower operational costs

According to Whit Gibbs, CEO at Hashr8, the refuse of the ruble'southward value may affect mining centers based in Russian federation.

The entire revenue of mining firms derives in the form of Bitcoin. But operational costs are oftentimes paid out in local national currencies. When the price of Bitcoin increases but the value of fiat currencies refuse, it drops the expenses for mining firms as local fiat currencies lose value confronting BTC.

The geopolitical risks in the global economic system and their possible impact on Bitcoin mining are non beingness accounted for. Hence, to state that miners are likely to capitulate in the latter half of 2022 can be premature.

Gibbs said:

This halving COULD be the most brutal in history merely information technology's all only a best guess. There hasn't been a comprehensive report in the final week to talk about electric current geopolitical and economic conditions, and how they'll bear upon mining/ the price of bitcoin.

Bitcoin mining difficulty adjustment

When the number of miners mining Bitcoin declines as a result of depression price and fewer block rewards after the halving, the difficulty of mining BTC automatically adjusts to maintain a steady cake interval.

Bitcoin mining difficulty

Bitcoin mining difficulty. Source: Blockchain.com

The term "mining" refers to the creation of new Bitcoins as a reward for contributing calculating resources to the network. The network automatically adjusts how difficult it is to mine BTC every two,016 blocks if the computing power, also known as the hash rate, drops (or rises).

The mining difficulty adjustment mechanism stops a cascade of miner capitulation from occurring, equally it volition get cheaper to mine BTC when the hash rate drops.