Bitcoin hashrate falls for first time since Chinese mining ban in 2021

The Bitcoin hashrate has fallen below the yearly average for only the second time in the network’s history. The only other time this happened was in 2021, when China imposed a ban on Bitcoin mining. The current hashrate sits at around 838 exahash per second, while the yearly average stands at 924 EH/s. This comes after the hashrate hit a record of roughly 1.25 zettahash per second earlier this year.

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In brief:

• The Bitcoin hashrate drops below the yearly average for the first time since 2021, falling from a record level of 1.25 ZH/s to around 838 EH/s.
• Several factors play a role: the halving of block rewards, a falling Bitcoin price, extreme weather conditions and diversification into AI.
• A lower hashrate could eventually lead to more decentralisation within the mining network.

Halving and price drop put miners under pressure

The decline in mining activity has several causes. First of all, the halving of April 2024 cut the block reward in half to 3.125 Bitcoin per block. Combine that with a drop in the Bitcoin price of around 52% over the past year, and it becomes less attractive for some miners to keep running at the same level. Bitcoin is currently trading around $85.600.

Extreme weather conditions have also played a role. Both a winter storm earlier this year and this summer’s heat forced miners to temporarily scale back or shut down their operations entirely. Disruptions in international shipping, caused by geopolitical conflicts, also made parts for ASIC miners harder to obtain and more expensive.

AI is pulling mining capacity away from the Bitcoin network

A factor that is coming up more and more often is the rise of AI. Miners already have large-scale computing capacity at their disposal, and a growing number of them are choosing to use part of that capacity for AI applications. In the current market, that yields more attractive margins than Bitcoin mining.

The Bitcoin network automatically adjusts its difficulty based on how quickly blocks are found. With a lower hashrate, that difficulty drops, which gives smaller miners more room to take part in the network. In the long term, that can contribute to a broader spread of mining activity across more parties.