Bitcoin (BTC) hash rate has dropped 30% over the past three days, according to industry insiders’ forecasts. Before halving, Cointelegraph asked a number of industry experts about their expectations of changes in the hash rate after halving.
Bitcoin mining costs
Halving the reward per block undermines Bitcoin miners’ incomes, reduces their margins, and sometimes makes operations at a certain level of difficulty unprofitable. While the income from a particular hashrate is the same for all miners, the costs they incur vary widely. For Bitcoin miners, electricity spending is by far the biggest cost driver.
Bitcoin hashrate. Source: Glassnode
The kilowatt hour price can be constant at a given location, but largely depends on the efficiency of the mining machinery that a miner uses. Mining machines of the later generation generate more hash electricity with a certain power consumption. Therefore, even if two Bitcoin miners pay the same price per kilowatt hour, their actual costs may vary.
More bitcoins in strong hands
Miners who handle old equipment or have high electricity costs may be forced to stop operating, at least temporarily. Some can rejoin the network as soon as a difficulty level is down. This benefits the rest of the miners, who extract more Bitcoin for each output. This should also have a positive impact on the market as the remaining miners will have to sell fewer coins to finance their business. Matt D’Souza, CEO and co-founder of Blockware Solutions, emphasized this point:
“So you can see that twenty-five to thirty-five percent of the network is turned off, and now twenty-five to thirty-five percent of the Bitcoin they received goes to anyone who survives, so whoever survives will do very well.” You’ll accumulate a ton of Bitcoin, so you don’t have to sell as much Bitcoin to pay your utility bills to buy more machines. Instead, Bitcoin will accumulate through very strong hands, very experienced miners, very efficient miners to sell to cover the costs. “
Christopher Bendiksen, research director at CoinShare, repeated the same feeling:
“According to our estimates, and these estimates are somewhat out of date, around 30 percent of hashrates are older generation devices. Therefore, around 30 percent of hashrates are at risk.”
A representative from RRMine, a global platform for the Hashrate trading platform, expressed a similar thought:
“We conclude that mine exits, which started in March, will increase by approximately 21% before halving, while mine exits will only decrease temporarily by approximately 29% on the day of halving. Therefore, the miners who survived the halving will see a huge increase in their production, which may be 11% higher than the previous results. “
Electricity networks are like the Bitcoin network
Philip Salter, Genesis Mining’s chief operating officer, discussed whether a fall in electricity demand due to the current economic crisis would lower electricity prices. He said that electricity networks work just like the Bitcoin network, where operators can leave the network depending on the price:
“I would say that you are probably right that energy prices should fall, but if energy prices fall, electricity producers will drop from the grid because the price of electricity is below the operating margin.”
Alex Mashinsky, CEO of Celsius Network (CEL), told Cointelegraph that while his company has seen a strong influx of Bitcoin deposits, he expects some smaller miners to sell their inventory. He believes that this could lead to a drop in prices in the short term, but remains extremely optimistic in the long term:
“PR will be wiped out next week, so we should see the sale of the win in the short term, but new long-term highs in the fourth quarter.”
In summary, the temporary decline in the hash rate for Bitcoin can be a bullish sign for Bitcoin.