Bitcoin Hash Rate Faces Potential 20% Drop Post-Halving, Analysts Predict

In an insightful report, Galaxy Digital analysts shed light on their forecast of a significant 20% drop in Bitcoin's network hash rate following the anticipated halving scheduled for April. 

This impending event, which will cut per-block mining rewards from 6.25 to 3.125 bitcoin, is expected to prompt miners to address the impact on their profitability by seeking greater efficiency and cost reduction measures.

Analysis highlights eight specific mining machine models that are likely to be affected, contributing to the expected decline in the network's hash rate. The current hash rate stands at approximately 515 examhashes per second (EH/s).

The prediction is based on a comprehensive analysis, considering factors such as the new block subsidy, transaction fees constituting 15% of rewards, and a Bitcoin (BTC) price assumption of $45,000, although the current price hovers around $52,000. 

Analysis also takes into account future power prices and costs from public miners, acknowledging the sensitivity of breakeven points for these ASIC models to fluctuations in bitcoin price and transaction fee proportions.

According to the report, miners utilizing older and less efficient machines may adopt strategies such as custom firmware to enhance ASIC efficiency or consider selling their equipment to miners with lower power costs.

This underscores the industry's ongoing quest for adaptability in the face of evolving market dynamics.

Chase White, a senior analyst at Compass Point Research & Trading, offers a slightly more optimistic outlook, anticipating a smaller decline in hash rate to an average of 500 EH/s in May from a projected 565 EH/s in April. 

White's projections incorporate a $55,000 average bitcoin price before the halving, with an expected rise to $57,500 afterward.

The anticipation of the halving has triggered significant investments in mining infrastructure, with companies like Riot Platforms and Bitfarms expanding their mining capabilities through substantial equipment purchases. 

White said, "we think miners who have low or no debt, bottom quartile power costs and efficient mining fleets will be fine." However, he acknowledges that challenges are expected, especially for miners on the margin of profitability who may need to assess their viability before potentially shutting down.

As the industry prepares for the halving and looks ahead to a market rebound in the second half of 2024, the dynamics of mining operations are poised for change. 

Miners are navigating strategies to adapt to the altered landscape, with an emphasis on efficiency, cost-effectiveness, and strategic positioning in the evolving Bitcoin mining ecosystem.