Up to 20% of Network Hash Rate Could Go Offline During Bitcoin Halving

According to Blockworks, Galaxy Digital analysts predict that up to 20% of network hash rate from eight mining machine models could go offline during the next bitcoin halving. The halving, scheduled for April, will reduce per-block rewards for mining bitcoin from 6.25 bitcoin (BTC) to 3.125 BTC. Miners have been working to increase efficiency and lower costs in anticipation of the event, as the reduction in rewards is expected to put financial pressure on the sector. The hash rate, a measure of the computational power of bitcoin's proof-of-work network, was approximately 515 exahashes per second (EH/s) at the end of 2023. However, Galaxy analysts estimate that between 15% and 20% of the hash rate from eight types of application-specific integrated circuit (ASIC) models could go offline when the halving occurs. The ASIC models analyzed include M20S, M32, S17, A1066, A1246, and S9, as well as the more efficient S19s or S19j Pros. Galaxy then considered projected future power prices and implied power costs from public miners. The estimate of between 15% and 20% of hash rate going offline is due to the sensitivity of the breakevens for the various ASIC models to bitcoin price and transaction fees as a percentage of rewards. Analysts believe that miners operating older and less efficient machines are likely running custom firmware to improve ASIC efficiency and thus improve their breakeven threshold. It is also probable that instead of certain ASIC models fully exiting the network, they will change hands to miners with cheaper power costs. Chase White, a senior analyst at Compass Point Research & Trading, expects a slightly lower decline in hash rate. Compass Point estimates hash rate to average 565 EH/s in April, given a projected $55,000 average bitcoin price that month. With the average bitcoin price expected to rise to $57,500 in May after the halving, the firm then expects hash rate to fall to an average of 500 EH/s in May, a roughly 12% decline. The market rebound in the second half of 2023 and the upcoming halving have prompted a surge in mining firm spending, with companies committing $1.2 billion for mining machines in the first 11 months of last year, according to BlocksBridge Consulting data.