Bitcoin miners are expected to face increasing pressure due to lower block rewards and shrinking profit margins.
After the long-awaited fourth Bitcoin halving was successfully completed on April 20, miners' struggle for profitability began. The event reduced the amount of assets produced daily by reducing block rewards from 6.25 BTC to 3,125 BTC. This greatly affected miners' profitability as they would rely more on transaction fees and higher BTC prices to stay afloat.

Snow Challenge
Bitcoin miners are expected to face increasing pressure due to lower block rewards and shrinking profit margins, according to Jag Kooner, Head of Derivatives at crypto exchange Bitfinex. This could force less efficient firms to exit the market unless there is a reduction in operational cost or a significant increase in the value of Bitcoin.
“But this change also presents an opportunity for innovation and efficiency improvements in the industry.” Miners can explore new regions with cheaper energy sources or invest in more efficient mining technology to maintain profitability,” Kooner said.
Mining may become more centralized among larger, more financially sound firms as less efficient mining organizations withdraw from the market. Many large mining companies have invested in new efficient hardware to improve their operations, adding thousands of miners to their existing machines. This can give them an advantage and help them maintain profitability.
Relying on Transaction Fees
Kooner also explained that the potential compensation for decreasing block rewards is an increase in transaction fees, which could occur if transaction demand exceeds the available space in blocks. But higher transaction fees could increase costs for users and make the Bitcoin network less attractive for small transactions. Additionally, a prolonged decline in Bitcoin's hash rate could weaken confidence in the security of the network and negatively impact BTC's adoption rate and price.
Price Performance of Bitcoin
Aside from higher transaction fees, rising BTC prices can also offset decreasing block rewards. This will most likely happen, as past halvings have been followed by Bitcoin rallies. However, BTC's rise in this cycle; Depends on various factors such as demand, investor sentiment and macroeconomic conditions.
Although there are various opinions on Bitcoin's post-halving performance, tensions in the Middle East may cause a pause in the trend predicted by analysts. Kooner said market sentiment shifted from optimistic to pessimistic after Iran launched unmanned aerial vehicles and missiles against Israel. “Whether this will impact fundamentals remains to be seen, but sentiment is certainly more cautious now than it was just a week ago,” the Bitfinex executive added.

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