April 14, 2024
Bitcoin Halving

Bitcoin Halving Sparks Concerns as Up to 20% of Hash Rate Faces Shutdown

In a recent report by Galaxy’s mining analysts, it has been predicted that up to 20% of Bitcoin’s current hash rate could go offline following the upcoming Bitcoin halving. The halving, slated to occur at block number 840,000 around April 20, will reduce block rewards from 6.25 BTC to 3.125 BTC, posing a significant challenge to miners.

The analysts based their estimation on the sensitivity of breakevens for various ASIC miner models to factors such as Bitcoin price and transaction fees. According to the report, as much as 70% of the Bitcoin hash rate at the end of 2023 was generated by eight specific ASIC miner models.

Galaxy’s prediction highlights a potential scenario where older and less efficient mining rigs, including Bitmain’s S9, Canaan’s A1066, and MicroBT’s M32, may face shutdown. On the more optimistic side, newer models like the Antminer S19 and S19J Pro, constituting over half of Bitcoin’s hash rate in 2023, are expected to survive.

Estimates for both low and high-end ranges of hash rate reduction across miner models after the upcoming halving. Source: Galaxy Digital

The report suggests that the breakeven point for these mining rigs is calculated based on “post-halving economics” with a Bitcoin price of $45,000 and transaction fees accounting for 15% of rewards. The analysts anticipate that miners operating older machines may adopt custom firmware or change hands to miners with cheaper power costs instead of going completely offline.

While the outlook for some mining rig models appears grim, the analysts note that their estimates could be influenced by business decisions. Miners operating newer S19 models might face profitability challenges, potentially leading to older models being purchased as upgrades.

As the Bitcoin halving approaches, the cryptocurrency community is closely watching how miners will adapt to the changing landscape and whether the hash rate will see a significant contraction in the aftermath of reduced block rewards.

Image by Gerd Altmann from Pixabay

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