On May 11 at 7:23 p.m. (UTC), Bitcoin experienced its third block reward halving when the 630,000th BTC block was mined into existence.
A halving is an event that decreases the reward cryptocurrency miners receive for verifying or "mining" blocks — or processing transactions — by 50%. Bitcoin halvings take place approximately every four years, making this latest halving the cryptocurrency’s third since its inception in 2008.
Bitcoin isn't the only cryptocurrency to have recently undergone a halving. Competing networks Bitcoin Cash and Bitcoin Satoshi's Vision — "forks" or variations of the original blockchain — experienced halvings in April over the course of two days.
Following their respective halvings, both networks saw a large decrease in their hash rates — the amount of computational power, measured in hashes, being allocated to mine blocks. These drops were caused by the halving, which forced miners operating with tight margins to turn off their machines or allocate their computational power to another blockchain or task.
In the fourteen hours after Bitcoin Satoshi Vision's halving, the network's hash rate fell from 3.06 exahashes per second to 1.23 exahashes, for a drop of approximately 60%, as Longhash reported at the time. And Bitcoin Cash's hash rate fell by more than 80% in the 24 hours after its having.
This drop threatened the security of these blockchains as predicted by LongHash's Kyle Torpey in April of 2019. At a time, web site Crypto51.app predicted it would cost 14,400% more to "51% attack" Bitcoin for one hour than it would cost to attack Bitcoin Cash for the same period of time.
Unlike its contemporaries, Bitcoin's hash rate has held up surprisingly well in the wake of the halving. Data from cryptocurrency mining site CoinWarz indicates that in the seven hours since the halving, the hashrate of the leading blockchain is down from 130.47 exahashes per second to 122.64 exahashes per second, as of 2:16 a.m. on May 12 (UTC).
Although this is a drop of 6.01%, it is far from the dramatic capitulation seen with the hash rates of the Bitcoin forks described above. To corroborate this, Blockchain.com's seven-day average of the Bitcoin hash rate currently sits at 120 exahashes per second, making this drop actually a return to the "average" hash rate of the past week.
The ongoing resilience of Bitcoin miners may be related to the high transaction fees being incurred by transactors of the cryptocurrency.
CoinDesk analyst Zack Voell noted on Twitter that transaction fees now make up 15% of the rewards miners get for mining blocks. These transaction fees being paid to miners may be offsetting some of the profitability concerns that resulted from the halvings of the two Bitcoin forks, which have a much smaller fee market due to their ability to process more transactions.
Bitcoin might not be out of the woods just yet, though.
Matt D'Souza, a hedge fund manager and the chief executive officer of Blockware Mining, explained after the halving that Bitcoin miners are at risk of "extreme capitulation." He argued that per his firm's data, approximately 30% of the network's hash rate is currently made up of mining machines that are now operating at a breakeven price.
If the price of BTC drops from $8,550, the breakeven level D'Souza indicated, or if the network hash rate increases from here, these marginal miners will be forced to turn off their machines.
Digital asset manager Charles Edwards echoed this sentiment, noting that his analysis indicates the global average cost of mining one Bitcoin has risen to $14,000 after the halving (This number was purportedly determined by assuming miners spend $0.04 per kilo-watthour). This means that if his data is true, many miners of Bitcoin are currently operating in the red, making the capitulation that D'Souza mentioned a possibility.
While this may be true, the fact that Bitcoin's hash rate has held up relatively well thus far suggests that miners are optimistic prices will soon resume higher. The strength may also indicate that other factors — such as crashing oil prices and more efficient mining machines — are increasing the profitability of miners.