So. We are in phase one of the after-halving. The hashrate has gone down. This was the logical outcome.
What is going on? Do you think miners will survive? Is this the end? no worries. let's see.
Why does this happen?
Hashrate is the frequency with which the network can calculate hashes per second to mine the blocks. When hashrate decreases, it often indicates that there is less computing power operating within the network. This can occur when less efficient machines are shut down by miners in response to unprofitable mining conditions. Mining is an energy-intensive and challenging process; if the cost of energy consumption exceeds the value of the bitcoins generated at current prices, many miners will deactivate their less profitable machines rather than risk accumulating debt or holding onto bitcoins in anticipation of future price increases.
halving effect
The bitcoin subsidy reward for mining new blocks is reduced by half after the halving. So, miners need the bitcoin price to double in order to maintain their profit levels, considering they still have to pay for energy costs in fiat currency. Prior to the most recent halving, many small-scale miners required a bitcoin price of $32,000 to break even, implying that they now need a price above $64,000 to operate without excessive financial stress.
Currently, the bitcoin price has dipped below $57,000 which isn't ideal for these smaller mining operations. While the relationship between price and hashrate is not perfect, it appears that there was a temporary surge in mining activity driven by favorable conditions, which is now correcting itself.
previous halving
Let's examine what occurred during the previous halving event. Interestingly, the hashrate did not decline significantly in the months that followed the halving. In fact, it wasn't until the major downturn caused by China's crypto ban that we saw a substantial drop in hashrate. Even after this setback, the hashrate rebounded within six months, demonstrating that the halving itself didn't have a catastrophic impact on mining operations.
Current situation:
But here we are in 2024, and what can we see now? This time around, the decline seems more pronounced compared to previous halving events. Will it recover again? It appears that the mining industry may have reached its peak and is now experiencing a reversal in growth.
Difficulty adujstment
Tomorrow, there is an anticipated -4.62% difficulty adjustment. As you can see from the chart, the hashrate line is currently below the difficulty line, which is unusual. This means that the upcoming adjustment will lower the difficulty to ensure blocks are still being created approximately every 10 minutes.
In theory, this would help those small miners to come back. However, if the Bitcoin price continues to decline, it's unlikely these smaller operations will be able to recover. As a result, the remaining active miners will likely enjoy increased profit margins for themselves. This leads to less decentralization in mining, which is not a good thing. But it is temporary, because it can only decrease to a level, until the old machines start mining again.
What does it need to happen?
In my opinion, Bitcoin price should go up. Ideally making new highs. When this happens, we will see confidence returning and hashrate going up again making the network stronger. Maybe this doesn't happen for a while. But eventually it will happen. Because the hashing rate top is indicating that it cannot continue without a higher Bitcoin price. Still, the hashrate remains substantial and healthy, and the network remains secure.
Will Bitcoin die again?
Recent news about Mt. Gox, Germany and the USA selling bitcoins, and negative ETF flows have all contributed more to selling pressure in the market. What does this mean? Is it the end of Bitcoin? No. It means cheaper sats for everybody to stack more!!! yay! Remember how many times Bitcoin died before.
what do you see?
If someone here has more mining experience, or direct connections to miners, what do you see? Do you see miners suffering a lot? Is there a bad mood? Are they optimistic? Thanks
happy stacking!
Quark