Oh, I see what you mean -- you don't mean contracts as in the number of miner's transactions/rewards per block, you mean contracts as in "the miner pool decreases in size." My bad, that was a mistake on my part.

Agreed, that's definitely a possibility, and that would improve energy usage. However, it would also make the network more vulnerable to 51% attacks, and if Bitcoin were to have enough value to actually replace a financial market, it would need a lot of miners to secure that value or it likely lose that value.

But... quibbles aside, you are completely correct that if mining stops being profitable then fewer people will mine, and that is also the correct answer for how to deal with Bitcoin's energy usage. Bitcoin miners will use as much much energy as it is profitable for them to use, and the only way to make that energy usage go down other than banning crypto would be to decrease the profitability of mining (ie, by keeping transaction fees and payouts low and by reducing other mining rewards) -- and that could be accomplished through either reducing the rewards, moving to another system like PoS that removes the miners entirely, or by Bitcoin's price crashing.