Bitcoin mining computing power hits a new high, will the market regain vitality after the halving?

On-chain data shows that the computing power of Bitcoin mining has rebounded significantly after a brief decline following the halving event, and has reached a new all-time high (ATH).

Bitcoin 7-day average mining computing power hits a record high

Bitcoin network achieves consensus through a consensus mechanism called “Proof of Work” (PoW). In this mechanism, miners compete using their computational resources to gain the right to add new blocks to the blockchain.

“Mining computing power” is an indicator that measures the total computing power contributed by miners to the Bitcoin network, reflecting the total amount of computing resources invested by miners to solve the Proof of Work (PoW) puzzle.

When the value of this indicator rises, it means that existing miners are expanding their facilities, or new miners are joining the chain. Such a trend indicates that these validators find the network currently very attractive.

On the other hand, a declining trend in indicators indicates that some mining farms have decided to disconnect from the network, possibly because they have found that mining on this chain is no longer profitable.

Now, here is a chart showing the trend of the average Bitcoin mining computing power over the past year 7 days.

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The value of this indicator seems to be rising sharply in recent days | Source: Blockchain.com

As shown in the above figure, the 7-day average computing power for Bitcoin mining began to decline after reaching a new all-time high last month. In the first few weeks of this month, the downward trend intensified, bringing the indicator to a significantly lower level.

The sharp decline in the indicator is attributed to a significant event that occurred on the network last month: the fourth Halving. Halving is a cyclical event that occurs every four years, permanently reducing the BTC block reward by half.

In Bitcoin mining, miners’ income mainly comes from two aspects: block rewards and transaction fees. Block reward is a fixed amount of Bitcoin that miners receive when they successfully mine a new block. Transaction fees, on the other hand, are small fees paid by users to miners in order to expedite their transactions.

In history, transaction fees are usually lower compared to block rewards. This is because block rewards are the main source of income for mining, while transaction fees only serve as a supplement. However, as the total amount of Bitcoin gradually approaches its limit (21 million), the future block rewards will gradually decrease until they eventually disappear. In this case, transaction fees will become the main source of income for miners.

Therefore, it is not surprising that some miners in areas with high electricity costs and low efficiency of mining equipment will disconnect as the economic effects of halving become apparent.

Bitcoin Halving’s Impact on Miner Income

However, this raises a question: considering that Bitcoin has already experienced three halvings in its history, how can mining computing power continue to rise and reach new highs as miners’ income keeps decreasing?

There are two factors that can explain this phenomenon. First, as time goes on, mining equipment becomes more efficient, allowing miners to operate at higher computing power while consuming less energy.

Another key factor, and perhaps more important, is that Bitcoin’s overall price trend has been rising throughout its history. Although the Block Reward is fixed in Bitcoin value before the Halving, its value in USD changes with Spot price fluctuations in the market. This means that although Halving results in a decrease in the number of Bitcoin per Block, the total revenue of the Miner is still likely to increase if the market price of the Bitcoin is rise.

One round after another, the price pump has helped offset the impact of halving on miners’ income loss. Recently, the price has shown some recovery, and as can be seen in the computing power chart, this indicator is also rising with the price.

Obviously, miners are satisfied with the profit growth brought by the price rise, and therefore have increased their computing resources, resulting in a new historical high for mining computing power.

At the time of writing, the trading price of Bitcoin is approximately $68,750.

Conclusion:

In general, despite the challenges brought by the halving event, Bitcoin mining is still able to adapt to these changes and continue expanding its mining capacity due to advancements in mining technology and the volatility of Bitcoin prices. This combination of adaptability and technological progress has not only restored Bitcoin mining power to pre-halving levels but also set new historical highs. In the future, as the Bitcoin economy and technology continue to develop, we can expect the mining ecosystem to continue demonstrating its complexity and dynamic nature.