In today's world of digital currencies, Bitcoin has always been a hot topic of concern. The cost curve of Bitcoin mining indicates that the computing power of the entire network may drop by 30% after the halving, which has aroused widespread discussion and attention. Let's explore this phenomenon in depth to reveal the underlying mechanism and possible impact.

As a cryptocurrency, Bitcoin's mining process requires a lot of computing power to ensure the security and reliability of transactions. Over time, the cost of Bitcoin mining continues to rise, while the mining reward is halved. This leads to a key question: after the halving, the overall computing power of the Bitcoin network may drop by 30%. This trend has aroused people's concerns and thoughts about the future development of Bitcoin.

The Bitcoin mining cost curve presents a special shape, indicating that the computing power of the entire network may change significantly. This change not only affects the income of miners, but may also have a profound impact on the security and stability of Bitcoin. How to interpret and respond to this change is one of the current focuses of research and discussion.

From a technical point of view, the cost of Bitcoin mining mainly includes electricity cost, hardware cost, and maintenance cost. As mining difficulty increases and computing power improves, miners need to invest more resources to maintain mining operations. However, once the mining reward is halved, miners' profit margins may be challenged, causing some miners to exit the market, which in turn affects the computing power of the entire network.

In the context of the current digital currency market, the future development of Bitcoin has attracted much attention. The 30% drop in computing power predicted by the mining cost curve may have a significant impact on the entire Bitcoin network. Faced with this challenge, miners, investors and relevant institutions need to work together to find solutions to ensure the security and stability of the Bitcoin network.

In general, the Bitcoin mining cost curve indicates that the computing power of the entire network may drop by 30% after halving, a trend that has triggered people's concerns and thoughts about the future of Bitcoin. In this turbulent world of digital currency, we need to have a deeper understanding of the nature and operating mechanism of Bitcoin in order to better grasp the future development trend. The future of Bitcoin is full of challenges and opportunities. Let us wait and see and witness the future of Bitcoin together.

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At the end of 2019, the Bitcoin halving was a major topic of discussion for everyone, and it was no different at the beginning of 2020.
However, with the roller coaster ride of Bitcoin in February and March, the topic of the impact of the halving on the market gradually faded. With only 41 days left before the Bitcoin mining reward halving, BitMEX's research on the mining cost curve reveals the possibility of interesting potential changes in Bitcoin's total network computing power after the halving.

Bitcoin Mining Cost Curve

BitMEX's Bitcoin Mining Research Report is the fourth in the halving series. In the research, BitMEX explored three possible curves for Bitcoin mining costs and compared them with the actual mining cost curve.
The first curve is simple and straightforward, which is the linear mining cost curve, followed by the "normal" mining cost curve and the mining cost exponential growth curve.

After the halving occurs, the Bitcoin mining reward will be halved, and the mining difficulty will most likely remain unchanged.
This is why the research report says that if this happens, the price of Bitcoin will collapse again from $6,000 to $3,000 after the halving.

Source: BitMEX Research

In the first linear Bitcoin mining cost curve (shown above), the green line is the new marginal production cost after the halving, which intersects with the price after the halving ($3,000). Based on these two data points, the total network computing power is expected to drop by 29% after the third Bitcoin halving.

Source: BitMEX Research

Similarly, the second cost curve is the "normal" mining cost curve, showing a 47% drop in total network computing power (hash rate) after the halving. For the third exponential mining curve, the total network computing power hash rate only dropped by 12%.

Since all of these curves are based on theoretical data and it is difficult to obtain actual data on the Bitcoin mining industry, BitMEX Research cites data from a recent research report by Blockware
Solutions, which categorizes the Bitcoin mining industry based on eight different tiers of electricity costs.

BitMEX's research states: "It is difficult to assess the accuracy of the data, but we analyzed the data and came up with the following cost curve. As shown in the figure below, the best fit line (red) is reasonably linear, similar to the case 1 in the above chart." 

As shown in the figure, the data plotted resembles a linear cost curve. But note that this is only based on the consideration that the cost of electricity remains unchanged. 

Research conclusion: 

Information about the revenue of the Bitcoin mining industry is obviously extremely transparent, but the cost structure is somewhat opaque. If Bitcoin succeeds, the Bitcoin mining industry is likely to develop and disclose more information to the public in the long run. Therefore, analysts may conduct extensive research and analysis on the cost curve and make reasonably accurate predictions about the impact of Bitcoin price changes or halving on the network hash rate. 

Therefore, due to the limited information currently available, this report is speculative in nature. However, based on the analysis in this report, it is expected that when the halving occurs, the total network computing power (hash rate) may drop by about 30% to 35%. 

There are many assumptions in our estimates above. We assume that the Bitcoin price has not changed, all miners are rational, and a large part of miners have not yet lost money. Since the halving will certainly bring price fluctuations, it is impossible to even tell whether our methods and calculations are correct. However, we think we have introduced a useful framework to evaluate the Bitcoin mining industry and the halving event.

What impact will the halving have on the Bitcoin mining industry? It is certainly a huge pressure for miners. On the other hand, given the actions taken by governments around the world to mitigate the impact of the new crown pneumonia, many other industries will also go through challenging times at the same time.

In the Bitcoin mining ecosystem, miners play a vital role. They maintain the security and operational stability of the Bitcoin network by providing computing power. However, as mining costs continue to rise, miners face increasing challenges. Once the computing power of the entire network declines, it may threaten the security of the Bitcoin network and even cause potential risks and vulnerabilities.