2020 is not the best year for Bitcoin miners.
The ongoing COVID-19 pandemic has had significant adverse effects for crypto mining businesses, causing struggles for large mining pools, retail miners, and hardware manufacturers.
While this year’s halvening facilitated a Bitcoin price rally, many miners have struggled to cope with the event’s profit loss.
On top of all this, BTC miners have also faced recent regulatory crackdowns and extreme weather conditions.
However, despite all these events, we have seen surprising reactions from the Bitcoin mining industry.
COVID-19 and Bitcoin Halvening
Let’s see the mining industry’s most important events this year, starting with the effects of the COVID-19 pandemic.
In March, the stock market experienced a significant fall, which facilitated a cryptocurrency price crash.
In the matter of a few days, Bitcoin’s price suffered a 46% decrease before entering into recovery.
With the BTC price, the Bitcoin hash rate – which refers to the network’s total computing power – had fallen from 123 million TH/s to 95 TH/s within the same period, indicating that miners had halted their operations due to the cryptocurrency market crash.
While it took nearly two months for the hash rate to recover its losses, miners had to face another major event: Bitcoin halvening.
In short, as part of a deflationary monetary system, the number of new Bitcoins miners generate with new blocks is cut in half every four years. We call this event the Bitcoin halvening or halving.
As block rewards decrease, so will miners’ profitability, causing a significant part of them to cease their operations, unless the market makes up for it in price.
Following May 11’s halvening event, we could witness the same trends.
Between May 11 and May 24, the Bitcoin hash rate fell by 25%, representing an even larger fall than during the coronavirus-fueled market crash.
Struggling Bitcoin Mining Manufacturers
In the past few months, crypto mining hardware manufacturers have been struggling with some major issues.
Bitmain, the largest cryptocurrency mining equipment provider, is experiencing significant delays in equipment delivery amid the company’s co-founders’ battle to gain control over its operations.
In July, the company’s former employees were accused of illegally moving 10,000 cryptocurrency mining devices from Bitmain’s Mongolia-based mining facilities.
Canaan, another large Bitcoin mining manufacturer, reported a net loss for Q2 2020, which the company attributes to the adverse effects of the pandemic and this year’s halvening event.
Extreme Weather and Regulatory Crackdowns
On top of being hit by the pandemic, Chinese miners were also affected by extreme weather conditions and recent regulatory crackdowns.
In August, China’s Sichuan province – which contributes over 50% of the Bitcoin network’s computing power (estimated) – experienced heavy rainstorms, resulting in daily hash rate falls between 10% and 20% at leading mining pools.
As part of a government crackdown, Inner Mongolia’s Department of Industrial and Information Technology disqualified 21 Bitcoin mining farms from trading energy in late August, increasing their operations costs.
Earlier in August, Kyrgyzstan announced a 15% tax on Bitcoin mining to help the country’s government cope with the pandemic’s effects.
All-Time High Mining Difficulty and Increasing Hash Rate
Despite all the bad news for Bitcoin miners this year, the mining industry continues to grow.
According to Blockchain.com’s data, the Bitcoin network’s hash rate has been uptrending since the post-halvening fall, increasing the cryptocurrency’s total computing power by 35% since May 24, and reaching the all-time high of 129 million TH/s on August 16.
Network difficulty – which automatically adjusts every two weeks based on hash rate changes – also reached an all-time high on August 31, which is up by 9% since this year’s BTC halvening.
Is a Bitcoin Rally Imminent?
Both Bitcoin’s post-halvening hash rate and difficulty increase indicate a healthy network and a growing mining industry.
In addition to a correlation between the Bitcoin price and hash rate, historical halvening events had fueled major BTC bull runs in the past.
During previous Bitcoin halvening events, the BTC value has surged by nearly 8,000% and 2,900% in the year(s) after 2012’s and 2016’s halving events, respectively.
Based on this data as well as the organic growth of the mining industry amid these uncertain times, a price rally would not seem out of place.
If it’s any indication, the cryptocurrency’s value has already increased by 38% since May 11, and is now testing the $12,000 resistance point.