The Bitcoin network’s energy consumption has fallen by 27 per cent. What will happen to cryptocurrency miners?
According to the Cambridge Centre for Alternative Finance (CCAF), the Bitcoin network’s daily energy consumption has fallen by around 27 per cent since mid-April. Over the same period, the value of the major cryptocurrency has fallen 53 percent and now balances just above the $21,000 level. That’s not all: if historical trends are taken into account, energy consumption could fall even lower. That said, some experts say that the bottom for the BTC price has already been passed. We tell you more about the situation.
We checked the current data: today the Bitcoin network hash rate is 228 hashes per second. The record was set not so long ago – on June 8, 2022, at that time it was 288 hashes per second.
Bitcoin network hash rate graph
Accordingly, the hash rate is relatively close to its all-time high, which confirms the continued appetite of miners. However, analysts share more in-depth data regarding what is happening.
What’s happening to Bitcoin mining
Whereas in mid-April the average daily power consumption of the Bitcoin network was 15 gigawatts, by today it has dropped to 10.65 gigawatts. This drop is a clear sign that many miners have been forced to unplug their crypto farms, as the BTC mining process itself has become unprofitable for them. Unfortunately, the number of players dropping out of the business can only increase.
As a reminder, the profitability of mining a cryptocurrency is primarily affected by its exchange rate, because the lower the price of the coin, the less it will bring the owner of the computing equipment in the dollar equivalent. The figure is also influenced by the so-called complexity. This is a self-adjusting parameter that reacts to changes in the hash rate of the network and ensures that the block creation time is approximately the same.
Bitcoin network energy consumption at the moment
According to Decrypt’s sources, Bitcoin’s price fell by almost 50 per cent between April and July in 2021. The CCAF energy consumption index also went down, but with a lag of several weeks. It peaked around 16 gigawatts in May, but had already fallen 56 per cent to 7 gigawatts by early July.
Historical trend of Bitcoin network power consumption
The truth is that it’s not all that simple here. Late last spring, the cryptocurrency network’s serious drop in power consumption was also due to a total ban on mining in China, although before that the country was still the largest mining hub in the world. Well now, miners are also preparing for a possible slow and long decline in the value of BTC.
Publicly traded mining companies, which must disclose bitcoin sales to the Securities and Exchange Commission (SEC), sold more BTC in May than they mined in the same month. Canadian Bitfarms, for example, last week sold 3,000 BTC for $62 million – almost half of the firm’s total assets. Its press release said Bitfarms had $42 million in cash and 3,349 BTC reserves worth about $67 million more as of June 20.
Read also: China predicts Bitcoin price to fall to zero. What's the reason?
The data on mass bitcoin sales by miners coincides with a new report from analytics platform CryptoQuant. According to Cointelegraph, its experts believe that the “final bottom” for Bitcoin has already been reached – at least judging by blockchain metrics. Here’s a relevant quote.
Our data suggests that the surrender of miners has already happened. A similar event preceded the bottom in previous Bitcoin cycles.
Bitcoin sales by miners by month
However, the biggest players in the business are still in the game. So far, Bitcoin’s mining difficulty and hash rate charts have not seen significant collapses. But small mining firms and hobbyists are likely to have suffered significant financial losses due to the start of the crypto-zima. They will have to continue to sell a larger share of their BTC mined in order to continue their operations.
Bitcoin mining hash rate and complexity
CryptoQuant CEO Ki Young Joo also pointed to a sharp increase in coin churn from the Coinbase exchange. In his view, this indicates that new "whales" may soon emerge in the market, with them already starting to accumulate bitcoins now.
Bitcoin inflows into exchanges
We believe that the situation with Bitcoin miners' energy consumption in the current market conditions is absolutely logical. Still, given the sharp collapse of the cryptocurrency exchange rate, it is essentially big companies, holders of a certain amount of coins or just fans of digital assets who are willing to mine it, regardless of the circumstances. It is worth admitting, though, that overall the network's hash rate has held up relatively well so far.
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