During the Bitcoin Halving on May 11, the block reward that bitcoin miners receive for mining the next block in the blockchain halved. Shortly after, the hashrate of the bitcoin network declined by about a third, but that has already fully recovered. At this point, the hashrate is about the same height as the peak before halving.
As part of Bitcoin’s monetary policy, the block reward that bitcoin miners receive for mining new blocks halves every four years: the so-called Bitcoin Halvings. As a result, monetary inflation in the bitcoin economy is falling, but for the miners, it is initially a bit of a swallow. After all, they see that the amount of bitcoins they can mine decreases by half by half, while they have to use the same amount of power.
Bitcoin halves can therefore cause some bitcoin miners to no longer be profitable after the halves and have to shut down their mining equipment. In that case, the miners’ combined computing power drops, usually expressed as the hashrate. This process acts as a kind of self-cleaning mechanism, leaving only the most efficient miners.
Shortly after the most recent Bitcoin Halving on May 11, we saw the hashrate drop sharply. Before halving, it was at its peak, but after that, the network lost about a third of the total available computing power in a short time.
The rapid decline in the hashrate temporarily caused some congestion on the network. If less computing power is available to mine, it also takes a little longer on average to find the next block. The transaction speed then decreases. In addition, a limited number of transactions fit in a block and when fewer blocks are found daily, the daily transaction capacity also decreases.
That also happened right after the most recent Bitcoin Halving. The size of the mempool, a sort of queue for transactions, increased as a result, which led to higher average transaction costs on the network through market forces.