Here’s Why Bitcoin’s Hashrate Fell by 25% 3 Months Before Next Halving

The Bitcoin hashrate has experienced a 25% drop since the weekend, raising concerns about the security of the network just ahead of the highly anticipated “halving” event.

Data sourced from BTC.com reveals a decline in global hashrate estimates from approximately 600 EH/s on Friday to 450 EH/s by Tuesday.

Texas Cold Weather Affects Bitcoin Hashrate

The Bitcoin hashrate drop coincided with a weather warning issued by the Electric Reliability Council of Texas (ERCOT) for January 14 to 17 due to extreme cold conditions. ERCOT, acting as the grid regulator for most of Texas, issued conservation appeals on Sunday, Monday, and Tuesday, expressing concerns about low operating reserves attributed to freezing temperatures, high demand, and unusually low wind.

The reduction in hashrate suggests curtailment of more than four gigawatts of power capacity during this period, as reported by TheMinerMag. Foundry USA Pool, a major mining pool operator, contributed to approximately half of this decline, witnessing a drop from an estimated 155 EH/s on Friday to 77 EH/s yesterday before recovering, according to MiningPoolStats.

The impact extended to users of Luxor Mining Pool and Marathon Digital, a Bitcoin mining firm. Luxor Technology Chief Operating Officer Ethan Vera revealed that the firm’s mining partners significantly scaled back operations, shutting down machines to allocate power back to the grid over the past few days.

Marathon’s VP of Corporate Communications, Charlie Schumacher, emphasized that Bitcoin miners in Texas act as a technology solution for the energy sector, serving as a flexible baseload that can be curtailed quickly to release energy for others in times of crisis, as observed in recent days.

Texas Emerges as Bitcoin Mining Hub

Texas has emerged as an alternative hub for Bitcoin mining after China’s dominance declined following the crypto mining crackdown. Texas miners argued that the symbiotic relationship between the industry and the state was mutually beneficial.

Several companies, including Marathon Digital, Riot Platforms, and Iris Energy, contributed to the growing concentration of Bitcoin mining facilities in Texas as they were attracted by factors such as cheap electricity, grid incentives, and the state’s deregulated energy market.

Texas-based Bitcoin miners have become accustomed to curtailment requests from the state. For instance, in August, Riot Platforms received a record $31.7 million worth of power and demand response credits from ERCOT following a substantial reduction in power usage exceeding 95% during a summer heatwave.

Similarly, Iris Energy received $2.3 million in energy credits in the same month, primarily due to voluntary curtailment at its Childress site in Texas.