Bitcoin's hash rate experienced a decline as Bitcoin mining firms began shutting down unprofitable mining rigs following the fourth Bitcoin halving. The network’s hash rate dropped to an over two-month low of 575 exahashes per second (EH/s) on May 10, before slightly recovering to 586 EH/s, based on data from blockchain.com. This reduction aligns with miners' decisions to deactivate rigs that are no longer profitable.

James Butterfill, head of research at CoinShares, confirmed in a May 13 post on X that the decrease in hash rate is due to miners turning off unprofitable rigs. This trend was anticipated in an April 19 report by CoinShares, which predicted a temporary hash rate drop post-halving but projected a rise to 700 EH/s by 2025. The report suggested that the hash rate could initially fall by up to 10% as miners shut down unprofitable ASICs.

The temporary reduction in hash rate is primarily attributed to the increased costs of Bitcoin mining due to the halving and rising electricity expenses. To mitigate these challenges, strategies such as optimizing energy costs, improving mining efficiency, and securing favorable hardware procurement terms are crucial for miners to maintain profitability.

Despite these challenges, infrastructure and energy costs remain pivotal for the profitability of Bitcoin mining. Nazar Khan, co-founder and COO of TeraWulf, noted that smaller mining operations with less energy-efficient equipment are more vulnerable post-halving. In contrast, companies with high-quality infrastructure capable of delivering low-cost power have a valuable asset. TeraWulf, the world’s eighth-largest Bitcoin mining company, valued at over $670 million, plans to expand its mining operations this year despite the halving.

The profitability of mining operations heavily depends on the electricity costs incurred by companies. According to a May 2 post by Hashrate Index, older ASIC models like the S19 XP and M50S++ operate at a loss when electricity costs exceed $0.09 per kilowatt-hour (kWh). This highlights the ongoing challenge for mining firms to manage operational costs and maintain profitability in a fluctuating market.