Bitcoin's Price Has Bounced but Miners May Still Be Switching Off Post-Halving

While bitcoin is fast reversing its pre-halving price drop, some miners still look to be leaving the network.

At time of writing, the top cryptocurrency by market value is changing hands at $9,730, representing a 20% gain on the low of $8,100 observed Sunday – the day before Bitcoin underwent its third mining reward halving.

The bounce has erased more than 75% of the drop from $10,500 to $8,100 seen in the three days to May 10. 

While the price has recovered a major portion of the lost ground, the cryptocurrency’s hashrate (the total computing power dedicated to mining blocks on the blockchain) has declined to 98 exahashes (EH/s) – that's down 27% from the high of 135 EH/s observed on Monday, according to data source bitinfocharts.com. 

The one-day hashrate often sees rapid fluctuations and provides less useful information about the broader trend. Hence, most observers prefer the seven-day average of the hashrate, which smooths out daily fluctuations. 

Also read: ‘History Has Repeated’: F2Pool Explains Message in Last Block Before Bitcoin Halving

That average, too, has dropped to 114 EH/s from the pre-halving high of 122 EH/s, according to data provided by blockchain intelligence firm Glassnode. 

The decline in the hashrate suggests some miners have scaled back or shut down operations following Monday’s halving of block rewards from 12.5 BTC to 6.25 BTC, which makes returning a profit harder or impossible with older mining machines (depending on the price). Validating that argument is the recent uptick in the mean block interval time, or the average time taken to mine a block.

The mean block interval time rose to 727 seconds or 12 minutes on Wednesday from a low of 8.5 minutes observed on Sunday.

The halving was expected to crowd out some miners, especially the ones using older-generation mining devices like Bitmain's Antminer S9s. 

While speaking at Consensus: Distributed on Tuesday, Alex de Vries, founder of financial and economic news portal Digiconomist and blockchain specialist, said, "S9s miners have already lived longer than expected and bitcoin’s price will have to double for these machines to become viable again.”

De Vries also predicted a decline of up to 20% in the hashrate in the short term. So far, the seven-day average has dropped by 6.5%. 

However, if prices continue to rise, even the older-generation machines might once more be worth switching on, especially as electricity costs are expected to go down with the arrival of the monsoon season in China’s Sichuan province, a region that contributes over 50% of the total mining power on the Bitcoin network. 

But even if prices rise over $13,760, the Antminer S9 would still be operating at a slight loss, according to a calculator provided by Poolin.

Some observers believe the miner capitulation happened during the first half of March when the cryptocurrency's price fell from $9,000 to $3,867. "We already had a mini halving in March due to the price crash. We don't expect a big drop in the hash rate in the short-term (sic)," said de Vries on Twitter.

See also: Many Ether Whales Might Be Leaving for Bitcoin: Data

A move above $13,000 looks unlikely right now, though a break above $10,000 cannot be ruled out because bitcoin balances on cryptocurrency exchanges have continued to decline post-halving – a sign of long-term bullish sentiment. 

The seven-day average of exchange deposits slipped to 2,323,951 on Wednesday to hit the lowest level since May 2018. Investors typically move their coins from wallets to exchanges during a price crash, or when they are skeptical about the sustainability of price gains.