After the halving, the Bitcoin network computing power decreased by nearly 20%. Is this temporary?

According to Decrypt on May 14, the hash rate of the Bitcoin network has dropped significantly after the halving. But this is something that many people in the mining industry expected in advance, and most people believe that the drop in hash rate is only temporary.

Bitcoin has just experienced its third halving, after which the mining reward was reduced from 12.5 bitcoins per block to 6.25 bitcoins. As the number of new bitcoins entering circulation each day decreases, the hash rate of the Bitcoin network has also decreased.

According to data provided by Ethan Vera of Luxor Mining Pool, the Bitcoin network’s hash rate (the total amount of computing power used to mine Bitcoin blocks) has dropped by about 20%.

Vera told Decrypt:

After the halving, the computing power of the Bitcoin network decreased by nearly 20%, and the total computing power dropped from 120 EH to 100 EH.

At the same time, miners’ income has also declined. Now “the profit per TH is 8.1 cents, while it was 13.5 cents before the halving, which means that miners’ income has dropped by 40%.”

According to data from F2Pool, the average revenue of miners has been cut in half over the past week, from $0.14 per TH to $0.07.

In addition, data from BitInfoCharts shows that Bitcoin's current hash rate is about 117 EH/s. It should be noted that the hash rate is a lagging indicator, and the data we see today is calculated based on yesterday's data. Therefore, to understand exactly how much the hash rate of the Bitcoin network has changed after the halving, we still need to wait for a week.

The drop in hash rate is normal. As a representative of Czech mining company Slush Pool told Decrypt, the mining industry had long anticipated this result.

Jan Čapek, co-founder of Slush, told Decript:

This is something we expected. With older generation miners no longer able to mine profitably after the halving, the estimated drop in hashrate is between 10-25%, so the ~15% drop we’ve seen so far is actually on the low side.

However, Denis Rusinovich, who runs an 80-megawatt mining pool in Kazakhstan, said that what they did not expect was that the price of Bitcoin rose directly to $10,000 before the halving. This allows miners with higher mining costs to survive for a while, which also means that the industry reshuffle will take longer.

Rusinovich said:

Miners generally expected the overall decline in Bitcoin network computing power after the halving to be around 30%, but no one could have predicted that the price of Bitcoin would rise before the halving. The rise in the price of the currency gave additional support to low-profit miners, helping them to survive the first two weeks.

In a way, the decline in hashrate is part of the halving process, as inefficient miners are being driven out of the game. Bitcoin's network hashrate difficulty will adjust in five days to correct the discrepancy. (This self-correcting mechanism ensures that the difficulty of mining Bitcoin always adjusts to the extent that the network hashrate changes: if the hashrate drops, the difficulty drops, and vice versa.)

Kristy-Leigh Minehan, CTO of Core Scientific, said in an interview with Slush Pool:

We will see a gradual decline in hashrate in the first three months after the halving, but not a sharp decline. After these three months, as the bottleneck of mining machine supply gradually eases, we will see mining farms replace old equipment with new equipment to obtain stable profits. (New mining machines include Antminer S17 and Shenma Miner M30, which have not been shipped due to the COVID-19 pandemic).

Slush Pool does not believe that mining difficulty or new mining machines are the only factors affecting the hashrate of the Bitcoin network. With China’s rainy season approaching, miners in Sichuan will have access to cheap hydroelectricity. These miners will even be able to run older generation mining machines like Antminer S9s.

Pavel Moravec of Slush told Decrypt:

Taking all these factors into account, it may take a month or two for the Bitcoin network’s hash rate to climb again. That’s assuming the price of Bitcoin doesn’t drop significantly, which we hope for.

As we wait for the difficulty adjustment of the new generation of mining machines, the price of Bitcoin is the best indicator for predicting the short-term fate of miners, in addition to the hash rate. Rusinovich supports this view and said that the lower the price of the coin, the longer it will take for the hash rate to recover, and vice versa.

If the price of Bitcoin moves closer to the $7,000 range, the mining sector will see a more drastic correction after the halving. But if the price of Bitcoin stays between $9,000 and $10,000, we should see the hash rate pick up in June.

As of press time, the price of Bitcoin has risen nearly 6% on the day and is trading at around $9,300.

This article was translated with permission from DecryptMedia.com