Galaxy analysts: 20% drop in Bitcoin’s hash rate coming following halving

Galaxy Digital analysts forecast a potential reduction of 20% in network hash rate due to the impending Bitcoin halving in April.

The analysts predict that the halving will affect eight specific mining machine models, dropping the network’s hash rate.

The halving will decrease per-block mining rewards from 6.25 to 3.125 bitcoin, prompting miners to seek increased efficiency and cost reduction to mitigate the impact of lower rewards. The current hash rate is approximately 515 exahashes per second (EH/s).

The affected models were identified in a report released on Wednesday.

This projection is based on an analysis considering the new block subsidy, transaction fees constituting 15% of rewards, and a Bitcoin (BTC) price of $45,000, with the current price of around $52,000.

The analysis also considered future power prices and costs from public miners. The variance in hash rate is attributed to the sensitivity of breakeven points for these ASIC models to fluctuations in bitcoin price and transaction fee proportions.

The report suggests miners with older, less efficient machines may use custom firmware to enhance ASIC efficiency or sell their equipment to miners with lower power costs.

Compass Point Research & Trading, through senior analyst Chase White, anticipates a slightly smaller decline in hash rate to an average of 500 EH/s in May from a projected 565 EH/s in April, factoring in a $55,000 average bitcoin price before the halving and an expected rise to $57,500 afterward.

The anticipation of the halving and a market rebound in the second half of 2023 has driven significant investments in mining infrastructure, with companies like Riot Platforms and Bitfarms expanding their mining capabilities through substantial purchases of mining equipment.

“We think miners who have low or no debt, bottom quartile power costs and efficient mining fleets will be fine,” White said. “Though we certainly expect there to be pain for everyone, especially early on, as miners on the margin of profitability try to wait each other out before shutting down.”