The Crypto Mining Sector Is Undergoing A Paradigm Shift: Roughly 50 EH/s Of Mining Rigs Equivalent To 50,000,000 TH/s Have Been Shut Off

May 22, 2020 / by Zachary Mashiach

The Bitcoin (BTC) block halving has come and gone, and for most of the crypto space it is now business as usual. However, the Bitcoin (BTC) mining sector is experiencing a complete paradigm shift as a tremendous amount of mining equipment is forced to shut off due to lack of profitability. This spells big trouble for crypto mining rig manufacturers like Bitmain, and also suggests that only the biggest mining operations are going to survive.

On May 9, a couple of days before the block halving, the Bitcoin (BTC) hash rate spiked to 136 EH/s. This appears to be the maximum hashing capacity of the Bitcoin (BTC) network, especially since this is equivalent to the all-time high of 136 EH/s which was recorded on February 29.

The reason that the hash rate spiked to full capacity is that miners wanted to get a share of the remaining 12.5 Bitcoin (BTC) blocks before the halving. Also, there was a modest rally leading up the halving, which increased mining profitability and simultaneously fueled hopes that Bitcoin (BTC) was about to see a major rally.

However, Bitcoin (BTC) has been stuck at or below $10,000, and the price needed to rise much higher, perhaps into the $15,000-$20,000 range, in order to sustain a growing mining sector. At the least, Bitcoin (BTC) probably had to rise to $15,000 or so in order to sustain the mining sector at pre-halving levels.

Instead, Bitcoin (BTC) dropped from $10,000 to $8,500 right before the halving, and Bitcoin (BTC) has not recovered since then.

The end result is that a large fraction of Bitcoin (BTC) mining rigs had to shut off, due to the 50% reduction in block reward combined with a stagnating Bitcoin (BTC) price.

The hash rate crashed as low as 81 EH/s on May 16, less than 5 days after the halving. This crash is similar to the hash rate crash which occurred in March when Bitcoin (BTC) briefly dropped as low as $3,850. Indeed, a Bitcoin (BTC) price of $10,000 pre-halving is equivalent to a price of $5,000 post-halving in terms of mining revenue, so basically miners are dealing with 2018 bear market levels of revenue.

Overall, it seems that the hash rate is stabilizing below 100 EH/s, possibly as low as 80-90 EH/s, meaning roughly 50 EH/s of mining equipment has been shut down due to lack of profitability. This is 36% of the network’s capacity/all-time high, and is equivalent to 50,000,000 TH/s of mining rigs being shut off.

Therefore, the crypto mining sector has experienced a paradigm shift, and has gone from growing steadily to rapidly contracting. Undoubtedly, difficult times lay ahead for mining manufacturers like Bitmain, since now the market is filled with possibly 50 EH/s of surplus rigs. Also, it is likely that most of the smaller mining farms have been wiped out by this halving, causing demand for mining rigs to simultaneously crater.

In other words, mining rig supply is skyrocketing while demand is cratering, which is the perfect recipe for collapsing the crypto mining rig market.

On a final note, another critically important part of this paradigm shift is that smaller mining operations have probably been mostly wiped out, centralizing the mining sector into the hands of the biggest mining farms. This doesn’t mean that Bitcoin (BTC) is less secure now, since there is still sufficient decentralization. It means that from here on out only major corporations will be able to profitably mine Bitcoin (BTC), and the days of individuals owning mining farms are coming to an end.

Zooming out, this seems to just be the natural progression of the mining sector. At first CPUs were profitable, then GPUs took over, then ASICs, and now only the biggest and most efficient corporate mining operations are profitable. Perhaps the next evolution after this would be national governments taking over the mining sector, and that may be something to watch for when the 2024 halving comes.


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