Key Points
- Bitcoin’s hash rate experienced a dip as mining firms shut down unprofitable rigs after the fourth Bitcoin halving.
- The decrease in hash rate is expected to be temporary, with predictions of a surge in the coming year.
Bitcoin’s hash rate, a measure of the network’s processing power, experienced a drop as mining firms began to shut down unprofitable mining rigs following the fourth Bitcoin halving. The hash rate fell to a low of 575 exahash per second (EH/s) on May 10 before recovering slightly to 586 EH/s.
This decrease can be attributed to miners turning off unprofitable rigs, a trend highlighted in a May 13 report by James Butterfill, the head of research at CoinShares.
Temporary Decline Expected
An April 19 report by CoinShares had predicted this temporary drop, but also forecasted a surge in the hash rate in the coming year. The report anticipates the hash rate to reach 700 exahash by 2025, although it could fall by up to 10% after the halving as miners turn off unprofitable ASICs.
The decline is attributed to the increased costs of Bitcoin (BTC) mining due to the halving and rising electricity costs. The report suggests strategies for mitigating these challenges, such as optimizing energy costs, increasing mining efficiency, and securing favorable hardware procurement terms.
Infrastructure and Energy Costs Crucial for Profitability
Nazar Khan, the co-founder and COO of TeraWulf, argues that only smaller mining operations with less energy-efficient equipment will be at risk after the 2024 halving. He believes that companies with quality infrastructure capable of delivering low-cost power will continue to be valuable.
TeraWulf, the world’s eighth-largest Bitcoin mining company, plans to expand its mining operations this year, despite the halving of block rewards. The company is valued at over $670 million.
However, the profitability of mining operations largely depends on the cost of electricity. Older ASIC models, such as the S19 XP and M50S++, operate at a loss with electricity costs above $0.09/kWh (Kilowatt-hour).
The S19 XP & M50S++ will operate at a loss if the hash cost rises above $0.09/kWh. If the cost rises above $0.08/kWh, the Pros & M50S+ will be unprofitable. At $0.06-$0.07/kWh, the S19j Pro+, j Pros, and M30S++ will struggle.
