The latest news in the field of Bitcoin mining talks about possible drops in hashrate and network difficulty during the months of July and August.
In fact, during the warmer months, North American miners usually intermittently halt their operations, taking advantage of specific energy incentives and saving on cooling costs for the plants.
With this expected slowdown of the hashrate, the mining companies in operation can take a breather from the post-halving situation and get a boost in extraction, waiting and hoping that the price of Bitcoin will increase by the end of the summer.
Let’s see everything in detail below.
Summary
Bitcoin news: the North American mining companies might feel the weight of the summer heat and decrease the active hashrate
The latest Bitcoin news discusses a possible slowdown in the hashrate and network difficulty, in anticipation of the arrival of the hottest months of summer, where mining activities usually become less intense in North America.
Usually, some mining farms like Riot and Core Scientific interrupt the extraction operations of the orange coin during the hottest hours of the summer months, having to face significant expenses for cooling the ASIC plants.
In fact, the miners use extremely powerful machines that emit a lot of heat due to their complex calculations that they perform, therefore they need a lot of energy (usually air conditioning) to cool them down, especially when the outside temperatures exceed 35°.
As the analysts of the Blockware Intelligence association indeed state:
“The number one operational challenge for Bitcoin miners is heat mitigation. ASICs are large and powerful computers that can reach very high temperatures without adequate cooling measures.”
Furthermore, it should be noted how these companies often make agreements with electricity suppliers Texans, who, finding it difficult to ensure the proper functioning of the grid throughout the State, offer miners “energy credits” for not working at certain times of the day.
This on one hand allows miners to compensate for the lack of extraction with a credit convertible into FIAT, often more advantageous in economic terms, and on the other hand allows suppliers to avoid blackouts and meet the entire market demand.
As reiterated by the members of Blockware Intelligence:
“Many miners have to reduce operations [during the summer months] partly due to overheating, but also due to residential energy consumption reaching levels high enough to trigger demand response clauses in miners’ power purchase agreements”.
In 2023 Riot has in fact generated as much as 24.1 million dollars in energy credits in August, an increase of 709% year-on-year compared to the data from the previous year, and 303% compared to the data from the month of July.
We will see if in 2024 RIot and other mining farm will adopt this strategy, which will inevitably lead to a decrease in the hashrate of the Bitcoin network.
It is important to emphasize that despite the drop in hashrate leading to a reduction in the security of the cryptographic network, on the other hand, it allows miners to have a slight increase in earnings, as there are fewer players in the game having to share the extraction reward.
In a scenario where, according to what was reported by SatoshiClub, the production cost for a BTC has reached the threshold of 74,600 and the price of Bitcoin is not taking off, it is clear that the slowdown of operations allows to avoid systematic losses.
Waiting for better times both in terms of external temperatures and market conditions in the crypto market, some miners prefer to mine only when necessary and shut down the plants when heat waves reach unsustainable levels.
The historical trend of Bitcoin’s hashrate: a continuously growing trend
The hashrate of the Bitcoin network has been continuously growing for years, following an unstoppable trend that sees the computing power of the network increasing more and more.
From 2016 to today we have witnessed strong declines in the metric only in particular situations, such as the ban of mining activities in China in 2021 and the consequent relocation of mining farms to Kazakhstan.
In any case, even in these situations, the network always recovers very quickly from the downsizing, and ends up becoming stronger than before.
At the end of May, Bitcoin’s hashrate reached a new all-time high at 657 TH/s, almost double the data from just 1 year ago, and more than 5 times the data from 3 years ago.
This highlights the tendency of mining operators to increasingly boost their production capacity and renew their facilities with the aim of generating the highest number of coins possible during the extraction phases
It is not a coincidence if after the halving in April some companies, such as Luxor, Riot and Marathon Digital have purchased new fleets of more efficient ASIC rigs to try to remain profitable, even with the halving of the block reward.
The typical decline during the summer months, as observed in the last two years, represents a slight reduction in the overall computing power of the network, and is not comparable to other events such as, for example, a crackdown by the Chinese government.
In the summer of 2021, for example, the hashrate dropped from 125 TH/s to 95 TH/s, while in the summer of 2022 it experienced a decline from 220 TH/s to 193 TH/s, only to see the loss promptly recovered very quickly in the following weeks.
We will see if this year too there will be the classic drop in hashrate and if this will help bring some fresh air to those companies that are currently mining at a loss, waiting for Bitcoin to break another historical price record, such as to guarantee the profitability of the extractions.
In this regard, as reported by a June 17 report by Colin Harper, head of content and research at the Luxor Hashrate index.
“As we enter the summer months in the United States, we are eager to see if the heat will force miners to reduce and thus suppress the growth of the hashrate as we saw in 2022 and 2023”.
In the meantime, we already see the first signs of a possible bear trend of the hashrate, with the metric having lost about 10% from the historical high of May.
