Bitcoin's Hash Rate Drops due to Shutdown of Unprofitable Mining Rigs Post-Halving
Summary:
After the fourth Bitcoin halving, Bitcoin mining companies have shut down their unprofitable mining rigs, leading to a drop in Bitcoin's hash rate. This was expected, with the rate predicted to rise again within the next year. The increased costs of Bitcoin mining due to the event, coupled with rising electricity prices, are cited as the reasons for the decrease. The overall profitability of mining operations largely depends on the cost of electricity. Firms with quality infrastructure capable of providing low-cost power are deemed to hold an advantage.
Bitcoin's hash rate has experienced a downturn as a result of Bitcoin mining companies powering down unprofitable mining equipment, following the fourth Bitcoin halving event. According to data from blockchain.com, the hash rate of the Bitcoin network dropped to a low of 575 exahash per second (EH/s) on May 10, its lowest in over two months. It has since recovered slightly to a current rate of 586 EH/s. This significant decrease is believed to be due to miners shutting down unprofitable mining rigs, as noted in a May 13 X post by CoinShares' head of research, James Butterfill.
Although this swift decrease was anticipated, as indicated in an April 19 report by CoinShares, the hash rate is predicted to rise again over the course of the next year. CoinShares' model forecasts a growth in the hash rate to 700 exahash by 2025, albeit, after the halving event, it was expected to experience a momentary drop of up to 10% as miners turned off unprofitable ASICs.
The increased cost of Bitcoin (BTC) mining as a result of the halving, coupled with rising electricity charges, is identified as the cause of this temporary reduction in the report. Optimizing energy costs, increasing mining efficiency, and securing better hardware procurement terms are listed as some of the potential mitigations.
However, the additional costs associated with infrastructure and energy are the primary factors determining the profitability of Bitcoin mining, as per Nazar Khan, co-founder and COO of TeraWulf. Post the 2024 halving, Khan suggests that only smaller mining endeavors utilizing less energy-efficient machinery stand to be threatened. He expressed this view in a Cointelegraph interview, stating that quality infrastructure capable of delivering low-cost power serves as an invaluable asset.
TeraWulf, valued at over $670 million and ranking as the world's eighth largest Bitcoin mining firm as per Companiesmarketcap, is planning to increase its mining activities this year, despite the halving of block rewards.
The overall profitability of mining operations is largely contingent on the cost of electricity paid by the companies. Hashrate Index's May 2 X post reveals that two older ASIC models, S19 XP and M50S++, would both incur losses if the electricity cost exceeds $0.09 per kilowatt-hour (KWh). Other models may also become unprofitable if costs increase.
Published At
5/14/2024 12:53:22 PM
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