After Halving, Bitcoin Mining Difficulty and Hashrate Sink
By Landon Manning
After the most recent halving of the Bitcoin block subsidy, data analysis illustrates pattern that many large bitcoin mining operations have shut down, at least for the time being.
The Block analyzed some of these indicators of the overall state of the Bitcoin economy, making particular note of both the mining difficulty and the hashrate. The mining difficulty represents the level of processing power required for miners to unlock new bitcoin, and there has been a noticeable relationship between this difficulty level and the proximity to Bitcoin Halvings.
Essentially, after the same amount of processing power will only yield half as much of a return in actual bitcoin, many smaller or over-leveraged miners will simply cease operations. However, in turn, this new lack of competition will help those miners that persist in getting a larger share of the subsequent mining subsidies. The Block went on to note that this particular difficulty decrease joins the club of the 20 largest decreases of all time, though it is still dwarfed by decreases from earlier this year as well as those from years as far back as 2011.
Another key indicator of the Bitcoin economy is the hashrate, representing the total processing power at work across the entire Bitcoin network. Leading to a hashrate plunge of nearly 30 percent, a significant number of miners have evidently determined that the process is no longer worth the electrical costs.
However, higher-ups from large mining pools like F2Pool and Poolin have noted a particular reason that this drop may be short lived. The majority of miners that have shut down operations are located in China, specifically in the Sichuan Province in the south of the nation. This area is a massive hub of hydroelectric power, and it is precisely for this reason that the miners flocked there in the first place. On May 25, 2020, the region’s torrential rainy season will begin, and the cities of the region will be flooded with cheap, renewable electricity.
Abundance of electricity in this one province will not be enough by itself to buoy the hashrate of the entire Bitcoin network. Other factors will need to remain stable or improve for more miners to come back online. Fortunately, a key one of these factors is performing admirably.
After some doldrums in March 2020, as the coronavirus was spreading worldwide, the price of bitcoin deteriorated. However, it’s steadily been gaining momentum lately, and the Halving has evidently proven to be a shot in the arm. Going up by as much as 16 percent since the Halving, the value of the crypto asset once again crossed the $9,000 mark recently and has stayed relatively high. As long as the price increases or least remains stable, it seems very likely that more miners will soon jumpstart their operations again once electricity costs go down.