According to CoinDesk, Bitcoin's hashrate and difficulty may decrease during the North American summer months as miners scale back some of their operations. This reduction in competition could provide some relief to miners who are already experiencing a profit squeeze due to the halving event, which cut Bitcoin mining rewards by 50%.
The relentless growth of Bitcoin's hashrate, or the computing power of the network, may finally slow down, providing miners with some respite as extreme summer heatwaves force the curtailment of some operations. Miners have seen their profit margins shrink in an already saturated sector after the halving reduced their mining rewards by 50%, while the hashrate continued to reach new all-time highs. The main reasons for the growing hashrate include previously purchased mining rigs coming online and miners scrambling to upgrade their fleet with more efficient rigs to remain profitable after the halving.
However, this relentless growth is expected to slow down over the next few months as North America enters the summer with its associated heatwaves. Miners use extremely powerful machines that generate a lot of heat due to their computations. 'The number one operational challenge for Bitcoin miners is heat mitigation,' said analysts at Blockware Intelligence. 'ASICs are large, powerful computers that can reach very high temperatures without proper cooling measures in place.'
This heat mitigation becomes an even greater issue during the summer as companies require more power to cool their machines and/or shut down operations due to high demand from energy consumers using their air conditioning. 'Many miners have to curtail operations [during summer months] in part due to overheating, but also due to residential energy consumption reaching high enough levels to activate demand response clauses in miners’ power purchase agreements,' Blockware added.
This seasonal phenomenon has resulted in a lower hashrate over the past two summers, and a lower hashrate means a decrease in the difficulty of mining a Bitcoin block. 'As we enter the summer months in the United States, we're keen to see if hot weather will force miners to curtail and thus suppress hashrate growth as we saw in 2022 and 2023,' according to a June 17 report by Colin Harper, head of content and research at Luxor Hashrate Index.
In fact, the hashrate has already begun to decrease since reaching an all-time high in March. As of June 17, it is lower by 10% to 589 EH/s, according to Hashrate Index data. Since most miners are located in the U.S., particularly in hot Texas, companies in North America shutting down their operations will likely impact the hashrate growth. 'According to data from the University of Cambridge, roughly 37% of all Bitcoin mining takes place in the United States,' said Blockware. 'As summer continues heating up, it’s reasonable to expect US-based miners to have heat-induced curtailments.'
The lower hashrate and difficulty could be a positive outcome for some miners as competition decreases for the summer. Additionally, some miners, such as Riot Platforms, will be able to earn extra income from the power grid by curtailing their operations as part of their power purchase contracts. 'If hashrate continues to stoop, then miners may be graced with a negative [difficulty] adjustment this week – here's to hoping!' said Luxor's Harper.