Summary
Galaxy Digital analysts predict that up to 20% of the network hash rate from eight mining machine models could go offline during the next bitcoin halving in April. The decline in rewards caused by the halving is expected to put financial stress on miners, leading them to boost efficiency and reduce costs. The estimate of 15% to 20% of hash rate going offline is based on the breakeven revenue for various ASIC models and their sensitivity to bitcoin price and transaction fees. It is likely that older and less efficient machines will either improve their efficiency or change hands to miners with cheaper power costs. Another analyst from Compass Point Research & Trading expects a slightly lower decline of around 12% in hash rate. Private miners without easy access to capital and those with higher power costs are more likely to shut down operations during the halving.
Key Points
1. Galaxy Digital analysts predict that up to 20% of network hash rate from eight mining machine models could go offline during the next bitcoin halving, scheduled for April. Miners are preparing for the event by increasing efficiency and reducing costs to cope with the decline in rewards.
2. The hash rate, which measures the computational power of bitcoin’s proof-of-work network, was around 515 exahashes per second (EH/s) at the end of 2023. However, Galaxy analysts believe that between 15% and 20% of the hash rate from eight types of ASIC models could go offline during the halving.
3. The decline in hash rate is expected due to the sensitivity of breakeven thresholds for different ASIC models to bitcoin price and transaction fees. Some miners may switch to more efficient machines or sell their older machines to miners with lower power costs. However, Chase White from Compass Point Research & Trading expects a slightly lower decline in hash rate, estimating a 12% decline in May after the halving.