Bitcoin miners go offline under pressure from price drop

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Key facts: Bitcoin mining difficulty has dropped to March levels. As the BTC price drops, many miners become unprofitable due to operating costs. The drop in the Bitcoin price has been pushing miners on this network to turn off equipment that is becoming increasingly unprofitable. As a result, both mining power (hashrate) and difficulty are also declining. Bitcoin's hashrate, which was above 600 exahashes per second (EH/s) in previous months, averaged around 560 EH/s throughout June. This loss of mining power has been a factor in the decline. impacted the most recent difficulty adjustment, which dropped from 83T to 79T. The network has not seen these levels since March of this year. The mining difficulty adjustment is a protocol that runs automatically in Bitcoin, as established by its source code. Its function is to balance the production of blocks, which must be 1 every 10 minutes. Since the mining power in the network usually varies, every 2016 blocks mined (something that takes about 2 weeks) Bitcoin mining becomes easier or more difficult, as required by the network.

Bitcoin mining difficulty fell 5% in its most recent adjustment, on Friday, July 5. Source: Braiins

Reasons behind the fall of Bitcoin hashrate

There are a couple of reasons why miners are forced to turn off more and more machines in their farms. The first is the halving, an event that, like the difficulty adjustment, occurs automatically on the network. The halving occurs approximately every 4 years, which is more or less how long it takes to mine 210,000 blocks in Bitcoin. Its function is to divide the amount of new bitcoins that are issued with each block. Initially, 50 BTC were mined per block, but after the fourth halving of the network, which happened on April 19 of this year, Now only 3,125 BTC are created with each mined block. Newly issued bitcoins are received by the miner who produced the corresponding block, so it works as an incentive. However, now that fewer BTC are issued per block, if the price does not rise, the profitability of mining is also halved. This brings us to the other reason, which is the fall in the price of bitcoin. Although the halving usually creates expectations of an increase in the price of BTC, this was the first time that the digital currency broke its previous all-time high before the halving occurred. However, bitcoin struggled to stay above USD 70,000 and has been falling. This Friday it reached USD 53,917, which implies a correction of 27% from the USD 73,836 it reached in March, as we reported in BitcoinDynamic. The fact that the issuance of bitcoins is reduced, coupled with its increasingly lower market price, strongly impacts the profitability of the miners of this network. This forces them to shut down mining equipment that is no longer profitable. to optimize their operations as much as they can. According to mining pool F2Pool, as long as the BTC price is below $58,000, a Bitcoin ASIC miner needs to offer an efficiency of at least 23W/TH to be profitable. Something that they estimate at an electrical cost of USD 0.08/kWh. According to the ASIC Miner Value website, the Antminer S21 Hyd and S21 Pro, from Bitmain, are some of the few Bitcoin mining equipment that maintain a positive profitability in the current scenario. Although with a cost of more than USD 4,000, the recovery of the investment would take at least 4 years, if all other variables remain stable. Regarding the fall in the price of bitcoin, analyst Willy Woo believes that the capitulation of the miners is one of the main causes of the fall of BTC. Something that, as logical as it may end up being, does not take away the irony of this situation that makes miners part of the problem that affects them.