Bitcoin Hash Rate Drops as Mining Firms Shut Down Unprofitable Rigs After Halving
Ruholamin Haqshanas
Last updated: May 14, 2024 07:24 EDT | 2 min read
The hash rate of the Bitcoin network has seen a significant decline as mining companies are shutting down unprofitable mining rigs following the fourth Bitcoin halving.
According to data from blockchain.com, the hash rate reached its lowest level in over two months on May 10, dropping to 575 exahash per second (EH/s). It has since recovered slightly and currently stands at 586 EH/s.
CoinShares’ head of research, James Butterfill, explained in a recent post on X that the decline in hash rate is due to miners turning off rigs that are no longer profitable.
CoinShares predicts a temporary drop in Bitcoin hash rate, but also expects it to surge in the coming years.
The reduction in hash rate is attributed to the increased costs of Bitcoin mining following the halving, as well as rising electricity costs.
To mitigate these challenges, the report suggests strategies such as optimizing energy costs, improving mining efficiency, and securing favorable hardware procurement terms.
Nazar Khan, co-founder and COO of TeraWulf, believes that smaller mining operations with less energy-efficient equipment will face challenges after the 2024 halving. Despite this, TeraWulf plans to expand its operations.
However, the profitability of mining operations depends heavily on the cost of electricity. Older ASIC models like the S19 XP and M50S++ operate at a loss when electricity costs exceed $0.09/kWh. The Pros and M50S+ models become unprofitable at $0.08/kWh or higher. Even the S19j Pro+, j Pros, and M30S++ models will face challenges when electricity costs range between $0.06 and $0.07/kWh.
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.
Bitcoin miners, including Riot Platforms, have been adjusting their operations after the halving event on April 20, which reduced mining rewards from 6.25 BTC to 3.125 BTC.
Markus Thielen, head of research at 10x Research, estimates that Bitcoin miners have the potential to liquidate approximately $5 billion worth of BTC after the halving.
CoinShares analysis suggests that Riot, TeraWulf, and CleanSpark are well-positioned to weather the upcoming challenges.
It is worth noting that the number of new Runes etched on Bitcoin daily has drastically declined, falling below 250 for the past six days.
Initially, the protocol provided a revenue boost for Bitcoin miners, but they are now seeking ways to offset the impact of the recent halving.
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