BitMex releases Bitcoin mining cost curve report, predicting that Bitcoin computing power will drop by 29% after halving

The Bitcoin halving has been a major topic of discussion and debate in the crypto space from the end of 2019 to the beginning of 2020. However, as the price of Bitcoin soared in February and became the focus of attention, the topic of halving gradually faded. With 41 days left until the halving, BitMEX published a research report on the mining cost curve, which revealed some interesting and potential possibilities after the halving.

Image source: pixabay

Bitcoin mining cost curve

This research report from BitMEX is the fourth in a series on Bitcoin halving. BitMEX explored three possible Bitcoin mining cost curves and compared them with the actual curve. The first curve is straight, a linear cost curve, the second is a "normal" cost curve, and the third is a quadratic cost curve.

After the halving, the Bitcoin block reward will be halved, while the amount of work completed will remain the same. Therefore, in this research report, the Bitcoin price after the halving is assumed to be halved from $6,000 to $3,000.

Image source: BitMEX Research

As shown in the figure above, in the first mining cost curve, it is a straight line, and the green line is the new marginal production cost after halving, which intersects with the price of $3,000 after halving. Based on these two data points, the Bitcoin hash rate is expected to drop by 29% after the third halving.

Image source: BitMEX Research

Similarly, the second cost curve is a “normal” curve showing a 47% drop in hash rate after the halving. For the third curve, the hash rate only dropped by 12%.

Since all of these curves are based on theoretical data, and actual data on the Bitcoin mining industry is hard to come by, BitMEX Research used data from a recent research report by Blockware Solutions, which divides the mining industry into eight different tiers based on electricity costs. The BitMEX research report states:

“It’s difficult to assess the accuracy of the data, but we analyzed the data and came up with the following cost curve. As shown in the figure below, the best fit line (red) is a reasonable straight line, similar to our scenario 1 in the figure above.”

Image source: BitMEX Research

As shown in the figure, the data plotted above resembles a linear cost curve; therefore, it should be noted that this is based only on considerations of electricity costs.

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