Galaxy Digital predicts a 20% drop in the Bitcoin network hashrate after halving

What’s new? The total computing power of the Bitcoin network may fall by 20% after halving, according to a report by crypto investment company Galaxy Digital of Mike Novogratz, citing data from Coin Metrics. Thus, after halving the remuneration, miners will shut down some of the rigs, leaving only the most profitable equipment in operation, experts believe. According to experts, at the end of 2023, more than 70% of the bitcoin hashrate was issued by eight models of ASIC miners.

Galaxy Digital’s report

Halving is code’s embedded cut in half of the reward to miners for a mined block on the blockchain, which occurs approximately every four years. Initially, miners received 50 BTC; on November 28, 2012, the number dropped to 25 BTC, on July 9, 2016, to 12,5 BTC, and on May 11, 2020, to 6,25 BTC. In April 2024, the award will be cut to 3,125 BTC.

What else is known? Experts predict that given how sensitive the breakeven levels of different ASIC models are to asset price and transaction fees, between 15-20% of the hashrate “could come offline.” The analysts came to this conclusion considering power prices, a bitcoin value of $45 000, rewards per mined block of 3,125 BTC, and 15% transaction fees.

According to Galaxy’s more conservative estimates, almost all older mining rigs, namely Bitmain’s S9, Canaan’s A1066, and MicroBT’s M32 models, will be shut down, while about half of MicroBT’s M20S and Bitmain’s S17 models will be able to stay online. These five models were providing about 15% of bitcoin’s hashrate at the end of 2023.

Analysts said the halving would not affect Bitmain’s Antminer S19 and S19J Pro and Canaan’s A1246, which provided more than half of the processing power, in such a dramatic way. Miners can only shut down devices with relatively high power costs, Galaxy clarified.

Experts cautioned that some business decisions could affect their estimates. For example, miners running old and inefficient installations are likely to receive special firmware to improve efficiency and performance, and some models may be moved to regions with lower electricity costs.

In January, total computing power on the Bitcoin network collapsed by 25% amid cold weather in the state of Texas, which led to local miners being cut off from the power grid. More than four gW of capacity was shut down.