Bitcoin mining companies continue to shut down non-profitable operations following the fourth Bitcoin halving event, leading to a noticeable decline in the Bitcoin hash rate. As reported by Blockchain.com, the Bitcoin network’s hash rate dropped to 575 exahash per second (EH/s) on May 10, marking its lowest level in two months, before slightly recovering to 586 EH/s.
What Is Occurring in the Mining Sector?
James Butterfill, head of research at CoinShares, highlighted in a May 13 post that the decline in the hash rate is due to miners shutting down non-profitable platforms. CoinShares had already anticipated this temporary drop in an April 19 report, predicting that the hash rate would increase next year. The report projected:
“Our model forecasts the hash rate will rise to 700 exahash by 2025, but it could decrease by 10% as miners shut down non-profitable ASICs post-halving.”
Insights from Industry Leaders
Nazar Khan, co-founder, and COO of TeraWulf, conveyed that primarily smaller mining operations with less energy-efficient equipment would be at risk post-2024 halving. He indicated that firms with solid infrastructure offering low-cost energy are likely to thrive, stating, “A company capable of providing low-cost energy is an invaluable asset, especially now, increasing its fundamental value.”
TeraWulf, valued at over $670 million, is the eighth-largest Bitcoin mining company globally and plans to expand mining operations this year despite reducing block rewards. According to a May 2 post by the Hashrate Index, older ASIC models like the S19 XP and M50S++ operate at a loss if electricity costs exceed $0.09/kWh. These models, along with the M50S+ and S19j Pro+, struggle with profitability at higher energy costs.
Effective Strategies for Mining Firms
To navigate these challenges, mining firms can adopt several strategies:
- Optimize energy costs by securing renewable or cheaper energy sources.
- Invest in more energy-efficient mining equipment.
- Negotiate favorable hardware supply conditions to reduce operational costs.
These measures can help mining companies maintain profitability despite the increased costs post-halving.
In conclusion, the halving event has presented significant challenges for Bitcoin mining firms, particularly those with outdated or inefficient equipment. However, firms that can optimize their operations and lower their energy costs are expected to emerge stronger, potentially benefiting from the increased value of their assets in the long run.