Bitcoin’s hash rate experienced a decline following the fourth Bitcoin halving, as mining firms began shutting down unprofitable mining rigs. On May 10, the hash rate dropped to its lowest point in two months, reaching 575 exahash per second (EH/s). However, it has since slightly recovered to the current level of 586 EH/s, according to data from Blockchain.com.
The decrease in hash rate can be attributed to miners turning off rigs that are no longer profitable, as stated by James Butterfill, head of research at CoinShares, in a post on May 13. CoinShares had predicted this temporary drop in an April 19 report, but expects the hash rate to surge in the coming year.
The report explains that the temporary reduction in hash rate is a result of higher mining costs due to the halving, as well as increasing electricity expenses. The profitability of BTC mining is heavily influenced by infrastructure and energy costs.
Nazar Khan, co-founder and chief operating officer of TeraWulf, believes that only smaller mining operations with less energy-efficient equipment will be at risk after the 2024 halving. In an interview with Cointelegraph, Khan stated that TeraWulf, the world’s eighth-largest Bitcoin mining company valued at over $670 million, plans to expand its mining operations despite the block rewards halving.
However, the profitability of mining operations largely depends on the electricity costs incurred by the companies. According to a post by Hashrate Index on May 2, the S19 XP and M50S++ ASIC models operate at a loss when electricity costs exceed $0.0 per kilowatt-hour.
Overall, while the temporary decline in hash rate may be concerning, there are opportunities for Bitcoin miners to remain profitable by managing costs effectively.