Bitcoin's Hashrate Dips, Signaling Potential Miner Sell-Off Amid Reduced ASIC Miner Profitability
Summary:
Bitcoin's hashrate, a measure of mining difficulty, has deviated from its 18-month upward trend, dropping to around 600 exahashes per second and implying a potential sell-off by Bitcoin miners. Despite this, data shows that there hasn't been a significant increase in Bitcoin miner outflows to exchanges, indicating the price dip might not be linked to miner sell-off. The drop in hashrate could be attributed to the deactivation of older, less profitable ASIC chip miners following the recent Bitcoin halving. The profitability of these mining operations heavily depends on electricity costs.
Bitcoin's computational power, known as hashrate, has deviated from its ascending path of the last year and a half, which may be indicating a potential sell-off by Bitcoin miners. The hashrate, which determines the complexity of mining Bitcoin, recently dropped to around 600 exahashes per second (EH/s) from its steady growth trend over 18 months. This sudden downturn hints that some miners could be offloading their Bitcoin holdings, as suggested by Ki Young Ju, the CEO and founder of CryptoQuant, in a post on June 13.
While the downturn in Bitcoin's hashrate may suggest as if miners are rapidly selling Bitcoin, data references do not corroborate this death knell scenario. The number of Bitcoins transferred by miners to crypto exchanges slid from a monthly high of 15,470 BTC on May 21, to a low of 7,239 BTC on June 13, according to CryptoQuant. Meanwhile, the price of a Bitcoin fell from more than $71,100 on June 5, to $66,800 currently, despite a noticeable decline in daily miner transfers to exchanges.
The drop in the true hashrate of Bitcoin might also be a result of mining operations shutting down their older ASIC chip mining platforms, which have become less profitable following the fourth Bitcoin halving. Concurrently, according to data from Blockchain.com, Bitcoin's total hashrate decreased to 586,377 TH/s on June 12. This temporary drop was already anticipated by a report from CoinShares on April 19, which projected the hashrate to rebound strongly next year. The report notes that, "despite a predicted decrease of up to 10% after the halving due to miners turning off unprofitable ASICs, we forecast the hashrate to rise to 700 exahash by 2025."
The increased cost of mining Bitcoin resulting from the halving, coupled with a rise in electricity costs, are linked to this temporary decline. Still, the extent to which this affects mining operations depends on the electricity rates the companies pay. Two older ASIC models, the S19 XP and M50S++, operate at a loss if electricity costs are more than $0.09 per kilowatt-hour, as noted by Hashrate Index's May 2 post. At a rate of $0.06-$0.07/kWh, models S19j Pro+, j Pros, and M30S++ will face difficulties.
Published At
6/14/2024 2:32:06 PM
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