2020 has been a wild year for Bitcoin (BTC), crypto in general, and more specifically miners. The year was a rollercoaster for them as we had the outbreak of a global pandemic and the bitcoin halving event. In this article, we look back at what might’ve been one of the craziest years for Bitcoin we’ve ever seen. All data used in this article comes from Blockchain.com.
Hash rate heavily influenced by 2 factors
Bitcoin miners were generating about 97 exahashes per second (EH/s) at the beginning of 2020 after the hash rate was consolidating for a while in the second half of 2019. This trend continued during the first two months of 2020 with miners producing about 123 EH/s at the beginning of March. After reaching this level, the first big event of 2020 happened that would shake up bitcoin miners.
In just a month’s time, the hash rate dropped back to a level of 95 EH/s. The reason for this drop was the outbreak of the coronavirus, which caused mayhem on basically all markets worldwide. The bitcoin price dropped under $3.000, stock markets collapsed and oil prices even went negative. It didn’t take long for the bitcoin price to recover, however. Miners picked up the pieces and started their recovery in preparation for the next big event; the bitcoin halving.
The bitcoin halving would cause mining rewards to be halved from 12,5 BTC to 6,25 BTC. The expectation was that this would have a strong effect on miners as making profits would become a bit harder for them. Right after the halving in May, the hash rate did indeed drop significantly, as expected. The recovery from the corona crash brought the hash rate back to 122 EH/s, but the halving caused it to drop back to 90 EH/s.
The mining industry shows resilience
Even though miners saw two big crashes in hash power, meaning many miners stopped participating for a while due to decreased profits, the hash rate did recover during the rest of 2020. This recovery was strong. More and more miners joined the network again and saw the potential of bitcoin. This recovery got an extra boost as big institutional investors started to see the potential as well, which caused a new wave of institutional money to enter the market.
The recovery eventually topped out at 144 EH/s, a 60% increase from the 90 EH/s low in March. This increase of mining participation shows that the industry is indeed still growing and that it is very resilient to almost catastrophic events such as a global pandemic, but also to events that directly impact the income of the miner such as the halving event.
This same trend is visible in miner’s revenues. In the last couple of months the bitcoin price rally, that saw bitcoin break its previous all-time high (ATH) of $20.000, caused miners to see their revenues increase significantly. Miners generate about $30 million per day at the time of writing. It is already more than two years ago that miners together generated this much revenue.
In short, 2020 was a wild year for the world in general, and also bitcoin and crypto miners experienced tough times. But the recovery looks strong which gives hope for a better 2021!