On March 16, the BTC hash rate slid below the 100 Exahash (EH/s) territory, way ahead of the expected Bitcoin halving 2020. The BTC hash rate has continued dropping at an alarming rate, at times, depreciating faster than its price. This drop may show that the miners powering the BTC network have begun to shut down their operations and are potentially leaving the market, leaving an aura of uncertainty for the future of Bitcoin.
Entering March, the BTC blockchain recorded a new all-time high for its hash rate at over 136 quintillion hashes per second. Since this peak, digital currency markets have lost significant amounts of value as more than $90 billion was erased at one point, from the market cap since the first week of March. As of reporting, BTC is above the $6,000 zone after breaking down from $7,500 to plummet under $4,000 in only a matter of hours earlier in the month. This significant development took place just after the digital currency was trading at over $10,000 a few weeks prior.
This price plunge has put intense pressure on pools processing transitions as many where operating at a significant loss and said to be better off investing in BSV outright on spot exchanges at recent prices than resuming mining operations on the BTC network.
Current processors have decided to reshape the scene by shutting off their energy-consuming rigs at a significant rate. Because of this latest development, the hash rate noted an abrupt plunge to approximately 75 quintillions or over 16%, the lowest point it has recorded since the end of December last year coinciding with the fall in price according to Glassnode. Data from monitoring resource Crypto This noted that at present, we would see the difficulty rate fall by almost 13%.
Transaction processing demands significant amounts of energy. The cost associated with energy consumption makes processing BTC at staggeringly low prices unprofitable. If the BTC price continues to trade at such rates, processors may further capitulate and sell off their BTC holdings to either fund operations, or to completely cash out and end the business venture.
Furthermore, this significant drop could produce more considerable uncertainty in light of the incoming Bitcoin halvings in May. Some Bitcoin users remain positive about the halvings, and few BTC supporters believe it will make the price rise claiming that BTC “recovers very quickly.” Contrastingly, other speculators are more realistic and understand that if BTC prices fail to rise, there could be severe consequences. Since BTC has no real utility, there is a high probability that it will occur.
The overall hash rate drop in March shows that miners need better economic models to profit, which is even more urgent after the block subsidy halving. For instance, during the first week of February 2020, the research and analysis firm Tradeblock published a report estimating the mining cost after the halving event. The researchers noted that the estimated cost to produce one BTC block after the halving should stabilize at around $12,500. If market rates do not quickly rebound to 2017 price levels, the BTC network may be living on borrowed time.
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