Bitcoin Hash Rate Drops as Mining Companies Shut Down Unprofitable Rigs Post-Halving
Ruholamin Haqshanas
Updated: May 14, 2024 07:24 EDT | Read Time: 2 mins
Following the fourth Bitcoin halving, the hash rate of the Bitcoin network has seen a significant decline as mining companies are shutting down unprofitable mining rigs.
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 slightly recovered and currently stands at 586 EH/s.
James Butterfill, the head of research at CoinShares, 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 predicted the temporary drop in Bitcoin hash rate in a recent blog post. However, the firm also expects the hash rate to surge in the coming years.
The reduction in hash rate is attributed to the increased costs of Bitcoin mining resulting from the halving, along with rising electricity costs.
The report suggests various strategies to mitigate these challenges, including optimizing energy costs, improving mining efficiency, and securing favorable hardware procurement terms.
Nazar Khan, the co-founder and COO of TeraWulf, believes that only smaller mining operations with less energy-efficient equipment will face challenges after the 2024 halving. TeraWulf, worth over $670 million, plans to expand its operations despite the reduction in block rewards.
However, the profitability of mining operations heavily relies on the cost of electricity. Older ASIC models, such as the S19 XP and M50S++, operate at a loss when electricity costs exceed $0.09/kWh, according to the Hashrate index. 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 companies 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 following the halving event on April 20, which reduced mining rewards from 6.25 BTC to 3.125 BTC, equivalent to approximately $180,600 at present.
Markus Thielen, the head of research at 10x Research, estimated in a recent note that Bitcoin miners have the potential to liquidate around $5 billion worth of BTC after the halving.
CoinShares analysis suggests that Riot, TeraWulf, and CleanSpark are among the best-positioned companies to weather the upcoming challenges.
It is important to note that the number of new Runes etched on Bitcoin daily has significantly declined, falling below 250 for the past six days.
Initially, the protocol provided a much-needed revenue boost for Bitcoin miners seeking to offset the impact of the recent halving.
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