The price of bitcoin might not be able to sustain the $9,000 level but miners are confident in the network and are dedicating resources at never seen before levels just before halving.
On May 3rd, the hash rate of the world's leading network made a new all-time high at 136.69 Th/s as per Coinwarz.com.
As Pavel Moravec, Co-CEO of Braiins said “the whole world strives to increase hashing power.”
— glassnode (@glassnode) May 3, 2020
As more and more miners commit their resources to the bitcoin network, now either the price has to spike or come halving, they will be heavily unprofitable.
This halving would cut down miners' inflow from 1800 BTC per day to 900 BTC per day. Moreover, Bitcoin’s breakeven cost at a hash rate of 135 Eth/s is $15,100, as per TradeBlock.
If BTC prices do not jump another 74% in the next week, a decline in hash rate is expected as low-profit operators go offline. But TradeBlock also found, historically, instead of a,
“large sustained crash in hash rate after past halvings, as miners cut rigs, we found that the market price of bitcoin rallied to levels above mining break-evens.”
Positive Difficulty Adjustment Coming
In addition to this pressure, mining difficulty is expected to adjust higher by around 1.5% which is not good for miners.
Just before the weekend, bitcoin miners were producing 16 blocks in 63 minutes versus the average time of 10 minutes for each block. Currently, the block time has increased from 8 minutes earlier in the day to 9 minutes 10 seconds, as per Bitinfocharts.
This rapid block production could signal that bitcoin’s current difficulty level is low and that the hash rate is much higher.
On May 12th, Bitcoin's halving would reduce mining rewards from 12.5 BTC to 6.25 coins. It also makes sense that miners want to mine as much BTC as they could before their profitability gets cut by 50%.
As per the mining pool Poolin, the difficulty will increase before the halving and the first 1008 block after the halving will be mined slowly like a good chunk (almost 30%) of unprofitable miners drop off the network.
What’s Going to Happen?
In 7 days bitcoin will see its inflation rate drop from 3.6% to 1.8%. Without a change in demand, this means the halving should trigger a price increase.
Hodlers meanwhile is fully invested and will continue to hold if the price goes up. As for the supply, this halving would make bitcoin even more scarce, nearly to gold’s level. Arcane Research noted,
“The halving could tilt the balance between the marginal buyers and sellers, setting off a bull market with a feedback loop where more people want to buy when the price rises.”