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Bitcoin network’s fourth halving is expected to occur in March 2024, this is when block rewards will be slashed in half from 6.25 BTC to 3.125 BTC. Analysts consider the current scenario, the macroeconomic outlook, US regulators’ sale of BTC and the regulatory crackdown as the “death spiral” of Bitcoin miner profitability and BTC price.
The creator of Bitcoin’s Stock-to-Flow model refuted the claims and argued that the fourth halving is not priced in yet.
Crypto analysts and developers behind the Twitter handle CoinClubQuincy presented a “death spiral” narrative for Bitcoin, miner profitability and BTC price in a recent tweet. Experts based their thesis on high hash rate stressing the energy grid and negatively influencing miner profitability.
In the long term, according to the bearish thesis, large scale miners are likely to drop off the network leaving block times to grow longer, and profitability would take another hit. Once a large percentage of miners have dropped off the BTC network, it would be vulnerable to attacks.
At this point, traders could increase the selling pressure on the asset, opening massive short positions to push BTC price lower for increasing their profitability, alongside sale of BTC by governments and regulators. The team is likely referring to the time when a US regulator sold BTC seized during the FBI’s crackdown on the Silk Road.
Plan B, popularly known as the creator of Bitcoin’s Stock-to-Flow model argues that the thesis is flawed. Miner “death spiral” is an unlikely scenario and argues that this is evidence that Bitcoin’s fourth halving is not priced in yet.
Each Bitcoin halving has pushed the asset’s price higher, to its new all-time high. While traders would expect the “halving narrative” to be priced in by now, bearish theses that call the death spiral or the end of BTC prove that it isn’t.
Bitcoin holders have noticed a slight retracement in BTC’s dominance and capital rotation into alternative cryptocurrencies. However, its important to note that China’s ban on Bitcoin resulted in several miners shutting down their mining operations and the hashrate simply migrated out West, with an adjustment period where mining profitability declined.
The Bitcoin network could have suffered a “death spiral” during China’s ban on Bitcoin, however the black swan event didn’t occur, fueling a bullish sentiment among holders and supporting the thesis of Bitcoin’s resilience against such events.
