top of page
  • Writer's pictureMAC10

The Bitcoin Halving Event

This is a special report on the impending Bitcoin halving event which is set to take place April 17th of this year.

First off, as most readers detect, I am a harsh critic of crypto currencies. I believe that if someone really believes the dollar or any other fiat currency is in imminent danger of debasement - which is the only real reason to own Bitcoin - then the only proven safe haven is gold. The only other reason to own Bitcoin is because you expect someone else with far less intelligence to pay more for it than you paid even though the intrinsic asset value is still zero.

That said, I think crypto currencies in some form or function will be with us for the foreseeable future, if only as a way of circumventing national financial systems and currency controls. A decentralized version of Paypal. The existence of crypto however is not the question. The question on the table is should this sector be accorded a combined market cap of $2.5 trillion. And should it be considered an "investable" asset class. And I believe the answer to both questions is no.

My first inclination on writing this article was to say that crypto currencies are pure play Ponzi assets meaning they have no intrinsic value or intrinsic yield. Their only "value" is defined by what someone else is willing to pay for a value-less asset. Granted, many people believe that the $USD has no intrinsic value either. And that may be true. However, the dollar has yield because every dollar that is held in a brokerage or bank account will earn some form of interest. Bitcoin pays no interest, especially when held in a brokerage account in the form of an ETF. The DeFi (decentralized finance) industry is trying to change all that by allowing crypto currencies to be made available for loans, however the amount of scams taking place makes the banking system seem sound by comparison. One could say that the number of crypto scams overall eclipses every other sector including the Silicon Valley/Wall Street crime syndicate. Every day someone is losing their life savings to some crypto scam.

But actually Bitcoin is far worse than a Ponzi scheme. Why? Because in a pure play Ponzi scheme, there is a transfer of wealth from the buyer to the seller in a zero sum game. One person's gain is another person's loss. However, much of the "wealth" funneled into Bitcoin goes straight into environmental destruction. It's no secret that Bitcoin has a very large carbon footprint. It currently costs somewhere in the range of $50,000 to mine a single Bitcoin. Yes you read that right. That is all WASTED energy cost. Somewhere on this planet a Bitcoin "rig" which is a fancy name for a high powered computer, is churning through massive numbers of algorithmic computations in order to "earn" the next Bitcoin from the blockchain. Actually, there are factories full of rigs all over this planet. Imagine $50k of electricity squandered to fabricate the next unit of a worthless currency. And it gets worse, because every transaction that takes place on the Bitcoin network after the Bitcoin is mined e.g. a Bitcoin consumer purchase or transfer of existing Bitcoin has to be "mined" as well. Those are what's called Bitcoin transaction costs. The current average Bitcoin transaction cost is ~$6.87. Meaning if that you paid for a cup of coffee with Bitcoin, the transaction fee would cost more than the coffee itself. Unless you're at Starbucks.

So what is a halving event? Every roughly four years the Bitcoin algorithm requires that the mining reward is cut in half for each Bitcoin. Meaning that it takes TWICE as much energy to mine each new Bitcoin as it did previously. One could wonder if crypto was invented by the Utility industry since they are the prime beneficiaries. With each Bitcoin halving a large number of "rigs" are forced out of the network which allows the remaining more efficient rigs to make more money. However, what it really means is that a lot of computer hardware is sent to the landfill after each halving event. Totally obsolete. In addition, transaction costs are known to spike after each halving event, sometimes to as high as $60/transaction which is what happened after the last halving. Imagine paying Paypal $60 to transfer money. It's the same idea.

However, it's this long-term declining value of mining crypto currencies that should be of most concern to investors. Below we see a chart of the largest crypto mining company in the world - Marathon Digital Holdings (MARA). This is a U.S. based company that went public over a decade ago, so it has a reasonably long history of data. What we see is that the stock is highly correlated to Bitcoin and yet it massively underperforms Bitcoin. As we see, during this latest Bitcoin spike to new all time highs, Marathon is making a lower highs and it's already heading lower. Today it was down -12%.

The question on the table then becomes why would a company that supports the Bitcoin network be going lower when Bitcoin is at an all time high. And the answer is that this company is only marginally profitable and only made a profit one year out of the past 13 years. They have half a $billion in cumulative losses on their balance sheet and they only have one year of cash left before they run out at their current negative cash flow run rate.

In summary, picture a scenario in which Bitcoin "halves" and then crashes and the cost of mining Bitcoins exceeds the efficiency of the most efficient Bitcoin rigs. That would mean a large amount of mining power would go offline at the same time. And then, getting out of Bitcoin could become impossible.

Related Posts

See All


bottom of page