The cryptocurrency mining industry is experiencing a significant downturn. Due to a sharp decline in returns, owners of computing power are being forced to halt operations. This trend has affected both private entrepreneurs and large-scale data centers facing record losses.
Why is Hashrate Falling?
The primary reason for the massive equipment shutdown is a lack of economic viability. When the cost of electricity consumed exceeds the market value of the coins mined, operation results in a direct financial loss.
Key Pressure Factors:
- Reduced Rewards: Following recent protocol changes (the halving), the number of new coins awarded per block has been cut in half.
- Rising Difficulty: Competition within the network remains high, requiring more resources to successfully find a block.
- Price Volatility: The drop in Bitcoin’s price below the “break-even point” makes the operation of older hardware models obsolete.
The Economics of Survival
Industry experts note that the profitability per unit of computing power (known as the “hash price”) has hit historic lows. Under these conditions, only those with access to the following can remain operational:
- Ultra-low-cost electricity (via direct contracts or renewable energy sources).
- Energy-efficient equipment of the latest generation, which consumes fewer resources while delivering higher performance.
Key Observation: The disconnection of less efficient machines is a natural self-regulatory mechanism of the network. This leads to a decrease in total mining difficulty, which eventually allows the remaining market participants to operate more sustainably.
Market Consequences
A massive “exodus” of miners typically foreshadows a period of consolidation. Smaller players without a financial cushion are forced to exit the market or sell off their assets.
What this means for the industry:
- Selling Pressure: To cover operating expenses and debts, mining companies are often forced to sell their accumulated cryptocurrency reserves, creating additional downward pressure on the market price.
- Network Health: In the long term, the market is purged of inefficient participants, leaving only the most technologically advanced and financially stable enterprises.
As long as market conditions remain challenging, experts do not expect hashrate to return to peak levels quickly. Miners have adopted a “wait-and-see” approach, hoping for either a price rally or a significant downward adjustment in mining difficulty.
