Hashrate And Halvings: What's In Store?

Bitcoin's network typically adapts rapidly to the cut in mining revenues.

How will Bitcoin miners adapt to the halving?

The next Bitcoin Halving is now just three months away. Sometime in the second half of April, likely around April 20, Bitcoin's block rewards will drop from the current 6.25 BTC to 3.125 BTC. Bitcoin's inflation rate will fall below one percent, making it the hardest money in existence.

While this is great for holders, Halvings have mixed implications for miners, and there is typically some short-term disruption to the network. As mining revenues are cut in half, less efficient rigs that operate on the edge of profitability are forced out of business.

Differing Costs

Of course, some miners are better placed than others to weather the revenue cut. While everyone has had time to prepare, since the Halving is programmed into the Bitcoin Protocol, miners face certain realities. Electricity costs vary depending on location, as do taxes on their profits. And, with new hardware being developed all the time, older rigs just may not be able to compete.

Hashrate and price chart, Blockchain.com
Bitcoin's hashrate (and price) have risen exponentially since inception.

In September last year, JP Morgan estimated the average cost of producing one bitcoin at $18,000. Given ever-increasing hashrate, after the halving, we might assume that number to be closer to $40,000, which matches Coinshares' report into mining companies.

Miners who cannot afford to keep their rigs running at this level will need to turn them off—and, remember, this is an average. Unless prices increase further, a large tranche of miners (Stronghold being an obvious example) will likely go offline.

Previous Halvings

Bitcoin has seen three Halvings in the past:

  • November 28, 2012
  • July 9, 2016
  • May 11, 2020

The backdrop for each of them has been different in terms of mining infrastructure and price action. At the first Halving, for example, most miners were using GPUs, as specialized ASICs were yet to dominate. Mining was still more of a hobbyist pursuit, rather than a meticulously-costed business enterprise, as it is today.

  • The 2012 halving saw hashrate decline 12%, from 24.7 TH/s to 21.7 TH/s a month later, before soaring prices returned them to profitability.
  • 2016 witnessed a similar 11% fall from 1.55 million TH/s to 1.38 million TH/s two weeks later. This was despite a 15% price correction at the time.
  • 2020 saw a steeper decline of 25%, from 121 million TH/s to 91 million TH/s in just two weeks. Hashrate returned to its prior levels in July, again helped by rising prices.

All of these previous examples show that Bitcoin tends to adapt rapidly to Halvings. There is typically a short-term effect as the lowest-efficiency miners go offline. However, they are quickly replaced by more efficient rigs, and overall hashrate is not significantly impacted over the long term.

With mining operations now being a highly organized part of Bitcoin's infrastructure, and some mining companies even being publicly owned, there is little chance of serious network disruption in April—even if individual miners might feel the pinch.


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