Other than the obvious price drop in Bitcoin’s market, there is a tangible metric on which to measure the impact of the Covid-19 pandemic in the industry. Bitcoin’s mining hash rate has fallen substantially this month — the same month that saw it reach a new all time high.
It is understandable that Bitcoin’s hash rate would fall under the pressure of lowered prices, and thus lowered profitability, but what makes it more interesting is that the mining space has been preparing for the reward halving set to take place in May.
The Bitcoin mining reward halving will see the amount of Bitcoin unlocked for mining a new block reduced by 50 percent which of course impacts mining operations greatly. This means that the time period leading up to the halving is usually alive with miners trying to cash in while they can.
The fall in the price of the coin, however, put paid to many mining operations who had slim profit margins already, but there is evidence of miners who have enough in the bank to weather this storm and stock up on mined BTC while they can.
Riding the difficulty drop
Bitcoin’s mining difficulty has recently been adjusted drastically to make it easier to mine the coins. This means that those companies that stuck it out since the price drop have been afforded an easier ride to collect coins before the halving.
Hedge fund manager Matt D’Souza explained on Twitter:
“After shutting off, Bitcoin they were receiving is allocated to the more efficient, experienced miners with excellent margins who are positioned to accumulate a larger percentage of the newly minted Bitcoin rather than having to sell it — significantly reducing sell pressure.”
Having less selling pressure will certainly help the market in general, as well as the miners, as they also remain incentives to mine as much as they can now before the halving, as well as hold onto their coins for a time where expectations are that the price will rise.
What will happen at the halving?
Many predicted that the halving would be a catalyst for new price action for Bitcoin and a path for it to reach a new all time high. Of course, a lot has changed in the past two months or so with the Covid-19 outbreak and the effect of this event may well be a damp squib.
This has even led Bitmain head Jihan Wu to predict that the bull run expected at the halving will be delayed as the markets look to get back on track.