A Week from Halving, Bitcoin Hash Rate Breaks New Record
As the price of BTC rallies, sidelined miners from the March crash are rejoining the network and pushing the Bitcoin's hash rate to new highs.
- Bitcoin’s latest price recovery has made mining profitable again.
- Miners who suspended operations in March are now turning machines back on.
- Older mining hardware is being phased out by newer models that are far more efficient.
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Bitcoin’s hash rate has climbed above its previous all-time high thanks to the latest rally in price. But with volatility a given in the Bitcoin market, the mining industry is also resorting to more sustainable ways to improve profitability.
How Price Affects Hash Rate
With Bitcoin bulls finding their rhythm and pushing the price above $8,000, some miners that were forced offline on “Black Thursday” have come back online, sending the network’s hash rate past 140 EH/s.
The flash crash in March caused a 36% decrease in Bitcoin’s hash power in the span of two weeks.
This decrease is due to mining farms operating older hardware suspended operations as they were producing coins at a loss. A series of increases in mining difficulty throughout 2019 further increased these costs.
Like American shale oil producers that halted new oil production as prices plummeted, Bitcoin mining farms turned off their hardware when BTC price dipped below a certain threshold.
But unlike oil, Bitcoin is not stuck in a demand rut; its price has since recovered over 120% in the last two months.
Many mining farms are now turning their machines back on as the price of BTC rises. This is one of the principal reasons why the network has just achieved a new all-time time high in hash rate.
Innovation in the Mining Industry
TokenInsight, a crypto data firm, released its 2020 Q1 Mining report that offers further insight into how the price crash affected different mining machines.
There was a sharp decrease in profitability for Bitmain’s Antiminer S17.
With an operating cost that ranged between $2,000 and $3,000 in Q1 2020, however, the machine continued to yield a profit margin above 40%.
However, the profit margin for Bitmain’s marquee Antiminer S9, which launched four years ago, crashed to -30%.
Further research from Blockware Solutions highlights the difference in efficiency between these two models.
Efficiency in the mining industry is no different from any other. Top machines are defined by those that can produce more hash power using the same amount of energy. And if not the same amount of energy, then the output is higher enough to compensate for the difference.
Further, improved efficiency stimulates Bitcoin’s hash rate and better secures the network.
As Blockware reports:
“Bitmain’s S17 Pro 50T consumes 50% more energy but produces 300% more hash power than the Bitmain S9 13.5T. Each S17 Pro 50T deployed is the equivalent hash power of four S9 13.5T.”
Still, the S17 is far from the most efficient mining hardware available.
Bitmain’s S19 offers 30% more hash power per watt of electricity consumed, and the S19 Pro offers 55% more efficiency than the S17.
Compared to these models, the S9 is nearing total obsolescence.
Innovation in mining hardware is pushing older machines out. Mining farms, as a result, will be better equipped to deal with price swings as they incorporate more efficient machines with lower breakeven prices. Thomas Heller, the global business director for the Bitcoin mining pool F2Pool, told Crypto Briefing:
“The MicroBT M30S series and Bitmain S19 series hit the market during the first few months of 2020. However due to the recent price volatility, combined with mining operators wanting to see how the halving plays out, there hasn’t been a huge amount of sales for these super new-gen miners. The recent network hashrate increase is from some of those miners that switched off in March coming back online.”
Competition within the production of mining hardware is also heating up, with Innosilicon, MicroBT, and Canaan creeping up on Bitmain’s market share.
“TokenInsight believes that Bitmain will continue to lead the way in this research & development heavy mining market, while the industry will continue having other challengers to inject fresh energy to the market,” said the research firm.
Miners Aren’t Doomed
Price is the most dynamic component of Bitcoin’s economic model, and despite the bullish hype surrounding the upcoming halving event, anything can happen.
Prices could even dive before the halving next week. As a result of this event, Bitcoin miners will see their revenue drop by 50%. As for developing a strategy, miners should continue lowering costs and innovating, according to Heller.
“The best way for any miner to prepare for the halving is through obtaining the lowest possible cost to produce one bitcoin. Scouring the global for cheap, stable power, and upgrading hardware to more efficient new-gen machines is the best way.”