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Bitcoin’s hash rate expected to drop by 20% after halving

Galaxy Digital analysts have projected a potential 20% reduction in the network hash rate as a result of the upcoming Bitcoin halving scheduled for April. This prediction is based on the anticipated impact on eight specific mining machine models, which would lead to a decrease in the overall hash rate of the network. The upcoming halving will cut per-block mining rewards from 6.25 to 3.125 bitcoins, prompting miners to focus on enhancing efficiency and reducing costs to counter the effects of lower rewards. As of now, the network hash rate stands at approximately 515 exahashes per second (EH/s).

The identified mining machine models that will be affected by the halving were outlined in a recent report released by Galaxy Digital Analysts. In their analysis, the researchers estimated that around 15-20% of the network hash rate, equivalent to 86-115 EH, could potentially go offline at the time of the halving. They further projected that by the end of 2024, the network hash rate could range between 625 EH and 725 EH based on their analysis.

The projections by Galaxy Digital analysts took into account various factors such as the new block subsidy, transaction fees contributing 15% of rewards, and a Bitcoin price of $45,000 in contrast to the current price of around $52,000. Additionally, considerations were made for future power prices and costs from public miners, as well as the sensitivity of ASIC models’ breakeven points to fluctuations in Bitcoin price and transaction fee proportions.

According to the report, miners with older and less efficient machines may opt to use custom firmware to boost ASIC efficiency or sell their equipment to miners with lower power costs. Compass Point Research & Trading, led by senior analyst Chase White, expects a slight decline in the hash rate to an average of 500 EH/s in May from a projected 565 EH/s in April. This forecast factored in an average Bitcoin price of $55,000 before the halving, with an anticipated increase to $57,500 post-halving.

The anticipation of the halving and a projected market rebound in the latter part of 2023 have fueled substantial investments in mining infrastructure. Companies like Riot Platforms and Bitfarms have been expanding their mining capabilities through significant purchases of mining equipment. White mentioned that miners with low or no debt, bottom quartile power costs, and efficient mining fleets are likely to weather the challenges posed by the halving. However, he acknowledged that there may be initial difficulties as miners on the edge of profitability navigate the minefield of cost and revenue fluctuations before potentially shutting down.

In conclusion, the impending Bitcoin halving in April is expected to have a significant impact on the network hash rate, prompting miners to adapt to the changing landscape by focusing on efficiency and cost reduction strategies. The projections provided by analysts paint a cautious yet optimistic picture of the industry’s resilience in the face of such challenges. As the halving approaches, the mining community will need to navigate these changes strategically to emerge stronger in the evolving digital currency market.

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