Bitcoin mining is poised for exceptional profitability in the upcoming three years, fueled by a convergence of two bullish factors.

In this article, we'll explore how the combination of rising transaction fees and the ongoing upward trajectory of Bitcoin's price will lead to exceptional profitability in the Bitcoin mining industry over the next few years.

In our early January article, we forecasted a Bitcoin price of $100k by the end of 2024. Since we published this article, bitcoin has surged from $43k to $70k and our 2024 prediction remains on track.

Considering that Bitcoin mining involves long-term investments due to the machines' useful lifespan of at least four years, it's imperative to adopt a more extended outlook for Bitcoin's price. Therefore, we will now extend our Bitcoin price prediction to 2026.

Several factors are aligning to pave the way for a bitcoin bull market in the next two years. Firstly, the upcoming halving event will result in a reduction of the bitcoin supply. Secondly, there's the potential for increased demand as new capital typically flows in post-halving, a trend observed in the three previous cycles.

What distinguishes the current scenario is the presence of numerous US-based spot bitcoin ETFs, which could significantly amplify demand. Consequently, these bitcoin ETFs have the potential to accelerate the impending bull market, exceeding initial expectations.

We are closely following the ETF research of Vetle Lunde from K33 Research. As he recently revealed, in less than two months since launch, the US-based ETFs saw net inflows of 167k bitcoin, corresponding to a daily net inflow of approximately 3k bitcoin. Comparatively, the after-halving daily supply issuance is only 450 bitcoin.

It's astonishing to note that US-based ETFs alone are accumulating Bitcoin at a rate nearly seven times higher than the post-halving supply issuance!

If one isn't completely brainwashed by Keynesian economic theories, it's clear that such a significant demand-supply imbalance can only result in a substantial price surge.

So, what is our price expectation for the next few years? Let’s have a look.

Our projection indicates that the Bitcoin price is poised to reach $250k by the end of 2026, with a confidence interval ranging between $200k and $300k. This forecast represents a 257% increase from today's price of $70k, promising a substantial boost in mining profitability.

It's crucial to acknowledge that our estimate is speculative, and uncertainties surround the actual figures. However, one certainty is that the heightened demand generated by the newly-approved ETFs will contribute to driving up the bitcoin price, given the fixed nature of its supply.

What separates the upcoming bitcoin mining bull market from the previous ones is the looming surge in transaction fees. The usual high transaction demand during the bull market will coincide with a new demand for ordinals and BRC-20 tokens.

This massive block space demand will cause transaction fees to surge to heights few would have dared to consider.

In 2022, the average transaction fee per block was a meager 0.1 BTC - only 1.6% of the block reward. In 2023, due to the emergence of ordinals and BRC-20 tokens, the average transaction fee per block hit 0.4 BTC. This number has since continued to increase and has been 0.6 BTC.

In 2024, I expect the average transaction fee per block to be somewhere between 1 and 2 BTC, which would tremendously benefit miners, particularly considering the upcoming halving. This means that effectively, with a block subsidy of 3.125, transaction fees could make up between 24% and 39% of the block reward.

In 2025, however, I expect transaction fees to surge from these levels and, for prolonged periods, stay at several bitcoin per block, as we have periodically seen during the last few months. In 2025, transaction fees could exceed the block reward.

The surging transaction fees mean that, in the next bull market, miners could earn the same block reward as currently, despite the block subsidy undergoing a halving in May.

An upswing in the Bitcoin price and transaction fees naturally results in increased profitability for mining operations. This, all else being equal, should lead to a similar increase in hashrate and difficulty until the profitability of the industry reaches an equilibrium.

Currently, there is limited unprofitable hashrate on the sidelines that could be reactivated, given the relatively high mining profitability in the present period. Looking ahead to 2024, we may find ourselves in a situation where hashrate growth is constrained, coupled with a rapidly rising bitcoin price, resulting in a highly lucrative environment for miners.

The higher bitcoin price in 2024, partially driven by bitcoin ETFs, has the potential to more than offset the effects of the halving, making it a potentially super profitable year for miners.

This surge in transaction fees, coupled with the expected rise in the bitcoin price, will make bitcoin mining super profitable over the next two years. The hashrate will struggle to keep up with these profitability increases.

We strongly advise individuals to seize the opportunity and acquire mining machines as soon as possible to adequately prepare for the upcoming bitcoin mining super cycle. We are offering hosted machines in Ethiopia at some of the world's most competitive hosting rates. Reach out to us for further details and to explore this lucrative opportunity.