Bitcoin’s fourth halving could lead to centralization of mining power, says Bitfinex.
Bitfinex warns of potential centralization of mining power amid concerns about the upcoming Bitcoin halving, which could put financial pressure on small-scale miners.
Bitcoin’s fourth halving, scheduled for around April 20, could force smaller miners to leave the market, with remaining mining operations likely only accessible to publicly traded miners.
According to a recent report from Bitfinex, the upcoming halving event could force smaller miners out of the market entirely, leaving publicly traded mining companies to dominate the sector. Bitfinex warns that this concentration of mining power “goes against the spirit of Bitcoin.”
“Centralization risk can mean potential censorship of transactions and increased vulnerability to coordinated attacks or regulatory pressures.”
Bitfinex
However, Bitfinex also assumes that the halving could have a positive outcome for the Bitcoin price, citing the reduced rate of new coin creation exacerbating supply shortages.
“If the price of Bitcoin rises sufficiently, it may offset the reduced block rewards to maintain or even increase mining profitability. These price increases are critical to encouraging continued investment and participation in mining activities.”
Bitfinex
Nonetheless, it is unclear whether the fourth halving will follow the pattern seen in previous cases. Cryptocurrency exchange Coinbase, for example, argued in a recent research report that everything could be different this time, seeking to identify Bitcoin exchange-traded funds (ETFs) that have built a new base of demand for BTC. It is due to changes in market dynamics.
“We believe that the current price movements are only the beginning of a long-term bull market and that further price increases will be needed to balance supply and demand dynamics.”
coinbase
As of this writing, Bitcoin (BTC) is trading at $68,000, according to CoinMarketCap data. Despite the slight pullback from all-time highs, industry executives are united in their expectations of a continued rise for Bitcoin, with expectations well above $80,000 for the remainder of the year.