The decline in Bitcoin's hash rate reflects the closure of unprofitable mining rigs among firms following the recent halving event.

The hash rate of the Bitcoin network has witnessed a significant decline as mining firms decommission unprofitable rigs following the fourth Bitcoin halving. Data from blockchain.com reveals that the hash rate dropped to its lowest level in over two months, reaching 575 exahash per second (EH/s) on May 10. It has since experienced a modest recovery and currently stands at 586 EH/s.The decline in hash rate can be attributed to miners shutting down rigs that have become financially unsustainable due to the increased costs associated with Bitcoin mining after the halving, coupled with rising electricity expenses. James Butterfill, the head of research at CoinShares, elaborated on this point in a recent post on X.CoinShares had previously predicted the temporary reduction in Bitcoin hash rate in a recent blog post. However, the firm maintains a positive outlook on the long-term trajectory of the hash rate.The reduction in hash rate is primarily attributed to the heightened expenses incurred during Bitcoin mining following the halving event. The report suggests several strategies to mitigate these challenges, including optimizing energy consumption, enhancing mining efficiency, and securing favorable hardware procurement terms.Nazar Khan, the co-founder and COO of TeraWulf, believes that only smaller mining operations utilizing less energy-efficient equipment will face difficulties post the 2024 halving. TeraWulf, valued at over $670 million, plans to expand its operations despite the reduction in block rewards.However, the profitability of mining operations remains heavily reliant on the cost of electricity. According to the Hashrate index, older ASIC models become unprofitable when electricity costs exceed $0.09/kWh. The profitability threshold is further lowered for more advanced models at $0.08/kWh and beyond. Even high-performing models like the S19j Pro+, j Pros, and M30S++ will face challenges when electricity costs range between $0.06 and $0.07/kWh.In response to the recent halving event on April 20, which reduced mining rewards from 6.25 BTC to 3.125 BTC, Bitcoin miners have undertaken adjustments to their operations. Riot Platforms exemplifies this shift in strategy.Furthermore, there are indications of a potential outflow of Bitcoin from miners in the months following the upcoming halving event. Markus Thielen, the head of research at 10x Research, estimates that Bitcoin miners could potentially liquidate approximately $5 billion worth of BTC after the halving.CoinShares analysis suggests that Riot, TeraWulf, and CleanSpark are well-positioned to navigate the impending challenges. It is noteworthy that the number of new Runes etched on Bitcoin daily has witnessed a significant decline, falling below 250 for the past six days. Initially, this protocol provided a much-needed revenue boost for Bitcoin miners seeking to mitigate the impact of the recent halving.