The recent bitcoin (btc) price rally has brought a double-edged sword for miners. increasing network security but raising concerns about its long-term sustainability.
While the hash rate, a measure of computing power dedicated to protecting the network, has increased to more 610 billion hashes per second, Miner fees have simultaneously plummeted to their lowest point in 2024, Glassnode data shows. This dichotomy paints a complex picture for the future of bitcoin mining. with possible shocks looming on the horizon.
Hash Rate Reaches New Heights and Network Security Strengthens
News that bitcoin price surpassed $50,000 for five consecutive days has attracted a wave of new miners, pushing the network hash rate to near-peak levels. tThis increase means more computing power dedicated to validating transactions and securing the network. This positive development highlights bitcoin's growing resilience against malicious attacks.
However, Increased competition has its other side. Our analysis reveals a corresponding increase in network difficulty, which makes it computationally more difficult and energy-intensive to mine a block. This poses a challenge for less efficient miners, potentially expelling them from the picture.
Decreased fees reduce miners' income
As the hash rate and network difficulty increase, Miner fees have plummeted. As of February by more than 5%, Rates peaked at 15% before plummeting to around 3% at the time of writing. marking the lowest point in 2024. This significant drop indicates that transaction volume has not kept pace with the influx of miners, leading to fierce competition for significantly lower rewards.
bitcoin currently trading at $52,194 on the daily chart: TradingView.com
While the current rate is not the lowest on record, raises concerns about long-term mining profitability. As Galaxy Digital analysts point out, up to 20% of the current hash rate could go offline after the next bitcoin halving, which will see block rewards halved.
Halving looms, efficiency becomes key
The upcoming halving in May 2024 poses another major challenge for miners. With block rewards dropping below 6.25 btc to 3.125 btc, Only the most efficient mining rigs will remain profitable.
bitcoin-big-halving-year/” target=”_blank” rel=”noopener nofollow”>Galaxy Digital Analysis, based on various energy prices and transaction fee assumptions, suggests that some popular mining models could become unprofitable after the halving, which could cause a reorganization among the less efficient operators.
On prices, regulation and innovation
The future of bitcoin mining remains uncertain. While the bitcoin” target=”_blank” rel=”noopener nofollow”>price around $50,000 indicates continued bullish sentiment, its impact on the halving is debatable. Some predict a price increase due to supply shortages, while others expect a temporary drop.
btc price action. Source: Coingecko
Besides, regulatory developments and the emergence of new technologies such as bitcoin Ordinals, which could increase transaction volume and increase miner fees, add more complexity to the equation.
bitcoin miners could face a period of significant change. While network security is bolstered by a rising hash rate, Declining rates and impending halving raise concerns about long-term profitability.
Featured image from Adobe Stock, TradingView chart
