The Bitcoin halving has not yet led to major market movements, and indeed the digital asset has been steadily traded between USD 8,700 and USD 10,000 since the halving happened. However, the halving did cause major movements in the mining sector, starting with an epic crash in hash rate which raised speculation that the mining sector would be stuck in a prolonged bear market. However, now the Bitcoin hash rate has mostly recovered, which is a very bullish sign for the mining industry, as will be discussed below.
First off, the reason that the 12 May halving had such a profound and immediate impact on the network hash rate is that the event slashed the block reward in half, from 12.5 to 6.25 Bitcoins. In order for the hash rate to remain steady through the halving the price of Bitcoin would have had to double since a doubling of its price would negate the effect of the block reward being cut in half.
However, rather than doubling, the price of Bitcoin dropped sharply in the days before the halving from USD 10,000 to USD 8,700, before recovering to USD 9,500 in the days after the halving. Since the price failed to increase through the halving, and instead dropped slightly, miners felt the full brunt of the block reward being cut in half.
This caused the Bitcoin hash rate to plunge from 136 EH/s to 81 EH/s in just one week, representing 55 EH/s of mining equipment being shut off. This 55 EH/s of mining equipment being shut off collectively represents the closure of countless mining farms. Essentially, due to mining revenue being cut in half, numerous mining operations became unprofitable and were forced to go offline.
When this happened there was speculation that the mining industry would be stuck in a prolonged bear market, and that many farms would go bankrupt. Additionally, mining rig manufacturers like Bitmain, Canaan, and MicroBT could have went bankrupt as well, since the 55 EH/s of rigs that were shutoff could have created a glut of cheap mining equipment, making it impossible to sell new equipment.
However, difficulty adjustments helped to bring the hash rate back up. Essentially, if the hash rate drops significantly, then the Bitcoin mining difficulty will drop as well to account for this drop in hash rate, and when the difficult drops it makes it easier to mine Bitcoin. The difficulty adjusted downwards on 19 May by 6%, with a downward difficulty adjustment of 9.3% on 4 June.
This downward adjustment in difficulty allowed a significant amount of Bitcoin hash rate to come back online, and the hash rate rose as high as 134 EH/s on June 4, meaning most of the rigs which were shut down after the halving were online and mining again.
That being said, the difficulty skyrocketed by 15% on 16 June due to this surge in hash rate, and the hash rate briefly dropped just below 100 EH/s, but quickly recovered to over 110 EH/s.
Ultimately, the Bitcoin mining difficulty is at the same level now as it was before the halving, yet the hash rate is over 110 EH/s, which is much higher than the post halving low near 80 EH/s.
Overall, this indicates that the mining industry is coming back to life, and this is likely largely due to an upward trend in Bitcoin’s price towards USD 10,000.
Of course, if the price crashes at some point to well below USD 10,000, the mining sector could be plunged into a bear market again. However, if Bitcoin breaks through USD 10,000, it seems the mining sector is poised for a full recovery.
What happens next remains to be seen and depends on Bitcoin’s future price movements, but overall it seems the block halving only caused a short term mining bear market and that mining farms and mining rig manufacturers are on their way towards a full recovery, and that fears of a long term mining bear market will not come to fruition.
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