The mining ecosystem is still dealing with the major cut in profitability that came from the Bitcoin Halving event earlier in May. As it stands, the mining hashrate is in freefall, but the fall is not too drastic or dangerous as it stands, but the question is how will this continue to impact the mining ecosystem.
The cryptocurrency industry saw earlier than the Bitcoin halving what happens when a big cut in rewards come as both Bitcoin Cash and Bitcoin SV went through their halvings before and saw drops as much as 80 percent in hashrate. This was quite damaging for the forks, but the fall in Bitcoin’s algorithm has not been as big yet.
In fact, the fall seen thus far is still less than what was seen when the price of Bitcoin fell dramatically in the middle of March which caused a bit of a capitulation of miners. But, many feel that that event helped sure up the mining space for Bitcoin in anticipation of the halving.
The question is will this hashrate bounce right back as the difficulty gets set to readjust in the next week or so? Bitcoin’s hashrate is self correcting and the difficulty adjusts depending on how much power there is in the network. If the hashrate stays down, or drops more, the difficulty could drop right down and entice miners to come streaming back with higher profitability.
Fears of a major fall
With events like a rewards halving there can be a major impact on the affected coins, and with Bitocin being such a major crypt currency, it would be highly concerning if something did unfixable damage.
However, it appears that even with the uncertainty of the event, there is nothing really to fear in the system. Bitcoin Investor and Analyst Tuur Demeester explained how thighs have been a lot uncertain before Bitcoin was this big. He looked back about the first halving:
“There was quite a lot of fear that maybe something might go wrong, who knows. We might have to fix a bug. ” He continued, “It was like a Y2K movement like what if the computers go from 1999 to 2000 like something good and nothing happened.”
However, with the third halving, the concerns, such as a debit spiral, is not as big of a fear according to Demeester. He stated:
“The debt spiral is not going to happen. I mean it is self-correcting when all of a sudden all the miners plug out their machines, which they have done, the hashrate goes down, and then two weeks later, it gets adjusted automatically.”