Bitcoin Halving Expected to Cause 20% Decrease in Network Hash Rate, Analysts Say
Galaxy Digital analysts are predicting a potential reduction of 20% in the network hash rate of Bitcoin due to the upcoming halving in April. This anticipated decrease will have a direct impact on eight specific mining machine models.
The Bitcoin halving, set to occur in April, will reduce the per-block mining rewards from 6.25 to 3.125 bitcoin. As a result, miners are expected to prioritize increased efficiency and cost reduction to mitigate the impact of lower rewards. Galaxy Digital analysts have identified eight mining machine models that will be directly affected by the halving, leading to a decrease in the network's hash rate.
Currently, the hash rate stands at approximately 515 exahashes per second (EH/s). However, Galaxy Digital analysts estimate that around 15-20% of the network hash rate, equivalent to 86-115 EH, could go offline after the halving. They further project that the network hash rate for 2024 will range between 675 EH and 725 EH.
To arrive at these projections, analysts considered various factors such as the new block subsidy, transaction fees accounting for 15% of rewards, and a Bitcoin price of $45,000. It is important to note that the current Bitcoin price hovers around $52,000. Additionally, the analysis factored in future power prices and costs associated with public miners. Fluctuations in Bitcoin price and transaction fee proportions were identified as contributing factors to the variances in hash rate.
In light of these predictions, the report suggests that miners who own older and less efficient machines may opt to enhance ASIC efficiency through custom firmware or sell their equipment to miners with lower power costs.
Compass Point Research & Trading, by way of senior analyst Chase White, expects a slightly smaller decline in hash rate. White anticipates the average hash rate to be around 500 EH/s in May, down from a projected 565 EH/s in April. This projection considers an average Bitcoin price of $55,000 prior to the halving and an expected rise to $57,500 afterward.
The upcoming halving, coupled with a market rebound expected in the second half of 2023, has resulted in significant investments in mining infrastructure. Companies like Riot Platforms and Bitfarms have expanded their mining capabilities through substantial purchases of mining equipment.
While senior analyst Chase White acknowledges that there will be challenges for all miners, he believes that those with low or no debt, bottom quartile power costs, and efficient mining fleets will be better equipped to navigate the impact of the halving. He also suggests that some miners on the margin of profitability may try to outlast each other before ultimately shutting down.
With the Bitcoin halving just around the corner, the mining industry braces for significant changes in hash rate and potential shifts in profitability.
Analyst comment
Neutral news: Galaxy Digital analysts forecast a potential reduction of 20% in network hash rate due to the Bitcoin halving in April. Miners may seek efficiency and cost reduction. The market may experience a temporary decline in hash rate but is expected to rebound in the second half of 2023.
