Ethereum [ETH] hashrate declines as miners move closer to bankruptcy

Recent data from Etherscan.io shows that Ethereum [ETH] has witnessed a massive 20% drop in its hashrate. It is said to be one of the biggest drops in ETH hashrate over the past year and is said to be on the same scale as those that have occurred since its creation. The hashrate has dropped from 294 TH/s [Terahashes per second] to 246 TH/s.

In August, ETH had recently witnessed a drop from 300 TH/s to 270 TH/s. The 30 Terahash drop had frightened the community, raising concerns about decreasing security on the platform. It is speculated that the recent drop occurred due to simple variance or because mining ETH was not profitable anymore.

ETH has suffered significant losses in price from more than $1100 to $400, which it then hit the price range of $167 before recovering to $218, at the time of writing. This might be one of the reasons for the reduction in the hashrate as the miners cannot cover the costs of electricity, hardware maintenance, and other associated costs. Cooling the equipment has become a substantial cost because a lot of heat is produced in the process of mining, thus there is a need to cool the equipment down to avoid the melting of components.

This movement might be indicative of a more serious problem for miners down the line. By assuming the price to remain constant, a reduction in the issuance of ETH by 33% would result in the reduction of the miner’s fiat revenue by 33%. There are a few efficient ASICs which are developed in order to mine Ether, but these ASICs activities are not being shown in the data because of the bouncing hashpower of some cryptocurrencies.

It was stated that Proof-of-Work [POW] mining has been a very competitive and energy-intensive business, leading to some of the miners preparing for an eventuality of a reduction in hashpower. This has led to them being well-organized and not needing any central coordination or authority protecting the business.

This movement marks Ethereum reaching the cost of production floor, similar to what Bitcoin faced in 2014-15. The Bitcoin network saw a considerable fall in its hashrate at that time, resulting in a number of Bitcoin mining operation filing for bankruptcy.