Decline in Bitcoin Network Hash Rate
The hash rate of the Bitcoin network has seen a notable decrease due to mining firms shutting down unprofitable rigs following the fourth Bitcoin halving. According to data from blockchain.com, the hash rate hit a low of 575 exahash per second (EH/s) on May 10, marking its lowest level in over two months. Since then, it has risen slightly to 586 EH/s. James Butterfill, the head of research at CoinShares, attributes this decline to miners turning off rigs that are no longer profitable.
Challenges and Strategies for Mining Firms
CoinShares has predicted a temporary drop in Bitcoin’s hash rate but also foresees a future surge. The increased costs of mining post-halving, alongside rising electricity expenses, are identified as primary factors for the hash rate reduction. Suggestions for mitigation include optimizing energy usage, enhancing mining efficiency, and securing advantageous hardware procurement terms. Nazar Khan, the COO of TeraWulf, anticipates that smaller mining operations with less energy-efficient equipment may face obstacles post the 2024 halving. Despite reductions in block rewards, TeraWulf aims to expand its operations, emphasizing the critical role of electricity costs in mining profitability.
“As mining firms adapt to the changing landscape, optimizing energy efficiency and reducing operational costs will be crucial for maintaining profitability in the Bitcoin mining industry.” – Anonymous
- Older ASIC models like S19 XP and M50S++ operate at a loss with electricity costs exceeding $0.09/kWh.
- At $0.08/kWh or higher, Pros and M50S+ models become unprofitable.
- Even models like S19j Pro+, j Pros, and M30S++ face challenges with electricity costs ranging between $0.06 and $0.07/kWh.
Bitcoin miners, such as Riot Platforms, have adjusted their operations post the halving event on April 20, which halved rewards from 6.25 BTC to 3.125 BTC. As a result, a significant outflow of Bitcoin from miners may occur shortly after the impending halving. Markus Thielen of 10x Research estimates that miners have the potential to liquidate around $5 billion worth of BTC post-halving. CoinShares analysis identifies Riot, TeraWulf, and CleanSpark as well-positioned companies to navigate through this challenging period. The daily creation of new Runes on Bitcoin has dropped below 250 for the past six days, impacting miners who once relied on this additional revenue stream to offset the halving’s effects.
