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Bitcoin Hash Rate Drops as Mining Firms Shutdown

Bitcoin network's hash rate has plummeted, as mining companies shut down post the fourth Bitcoin halving
May 15, 2024

The Bitcoin network has witnessed a significant drop in its hash rate recently, as mining firms shut down unprofitable mining rigs following the fourth Bitcoin halving event. According to data from blockchain.com, the hash rate hit its lowest level in over two months on May 10, dropping to 575 exahash per second (EH/s). Though it has slightly recovered since then and currently stands at 586 EH/s.

James Butterfill, CoinShares' Head of Research, explained in a recent post on X that the decline in hash rate can be attributed to miners turning off rigs that are no longer profitable.

CoinShares predicted this temporary drop in Bitcoin's hash rate but expects it to surge again in the coming years. The increased costs of Bitcoin mining due to the halving, along with rising electricity costs, are cited as the main factors behind the reduction in hash rate.

To mitigate this, CoinShares suggests several strategies, including optimizing energy costs, improving mining efficiency, and securing favorable hardware procurement terms.

Nazar Khan, the COO and Co-founder of TeraWulf, one of the world’s largest Bitcoin mining companies, with a valuation of over $670 million, believes that only 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 is heavily dependent 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. Even newer models like the Pros and M50S+ become unprofitable at $0.08/kWh or higher. The S19j Pro+, j Pros, and M30S++ models also face challenges when electricity costs range between $0.06 and $0.07/kWh.

As mining firms adapt to this changing landscape, optimizing energy efficiency and reducing operational costs will be crucial for maintaining profitability in the Bitcoin mining industry.

After the halving event on April 20, which reduced mining rewards from 6.25 BTC to 3.125 BTC, miners have been adjusting their operations. A significant outflow of Bitcoin from miners could be on the horizon in the months following the upcoming halving event, according to Markus Thielen, the head of research at 10x Research. He estimates that Bitcoin miners have the potential to liquidate approximately $5 billion worth of BTC after the halving.

According to asset manager CoinShares, Riot, TeraWulf, and CleanSpark are among the best-positioned companies to weather this impending storm.

It's important to note that the number of new Bitcoin mined daily has seen a drastic decline, falling below 250 for the past six days. Initially, this protocol provided a much-needed revenue boost for Bitcoin miners seeking to offset the impact of the recent halving.

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