Bitcoin Miners Begin Reducing Operations After Halving, Data Shows

Last updated: May 13, 2024 1:14 pm EDT | 1 minute reading

Source: Dalle-3

Bitcoin mining companies are reducing the use of their computer fleets after industry revenues fell substantially last month, according to a May 13 Coinshares report.

After reaching an all-time high last month, the seven-day moving average for the hash rate of the Bitcoin network has decreased rapidly since the beginning of May. Peaking at around 650 exahashes per second (EH/s) on April 19, the metric was 586 EH/s on May 11.

Bitcoin Miners Cut Costs After Halving

A “hash” is a guessed answer to a complex mathematical problem needed to solve and extract Bitcoin’s next block. Bitcoin miners race to solve these blocks using energy-intensive computer systems that specialize in producing hashes as quickly as possible.

As such, the network’s total hash rate can help measure how much energy miners dedicate to their operations.

Although hash rate typically tends to increase over time, events that affect mining company profitability can cause industry operations to decline. One of them occurred on April 19 in the form of the Bitcoin halvedwhich reduced the fixed subsidy associated with each Bitcoin block from 6.25 BTC to 3,125 BTC – a nearly 50% reduction in the miner’s net revenue.

Based on numbers from Q4 2023 reports, CoinShares estimates that the average BTC production cost from publicly listed Bitcoin miners was $53,000 per coin immediately after the halving. With BTC trades at $63,000 on Monday, this suggests that miners are still profitable – albeit much less so than before.

“Key mitigation strategies include optimizing energy costs, increasing mining efficiency, and ensuring favorable hardware procurement conditions,” wrote CoinShares. “Miners are actively managing financial liabilities, with some using excess cash to significantly reduce debt.”

A changing mining scenario

Public Miner Number Reports in April showed that most experienced small but manageable drops in Bitcoin revenues in April, which will likely fall further by the end of May.

Some companies, such as Digital Marathon (MARA) and Riot Platforms (RIOT), reported halving mining with around a third of their hash rate energized, suggesting that halving activities have already begun.

Fortunately for miners, new Bitcoin applications like Ordinals and Runes helped increase activity on the network and network transaction fees, from which they also make a profit.

Last week, CEO of CryptoQuant Ki Young Ju said transaction fees now represented 7% of the mining company’s revenue, up from 1% two years ago.

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