After the halving on May 11, some skeptics speculated that the miners would capitulate or that the whole process would enter a phase “Death Spiral”. Three months passed very quickly and Bitcoin’s (BTC) hash rate is at a record high.
An all-time high hash rate and the stability of the Bitcoin mining industry They are positive signs of BTC’s medium and long-term trend.
An increasing hash rate is a good thing for Bitcoin
According to data from The Mining of Glassnode and Bitcoin rose 3.6% on August 24 and is now at a new high. The data shows that many miners are actively mining BTC, even more than before the halving.
Difficulty of Bitcoin mining besides the price of BTC. Source: Glass knot
Although the Bitcoin hash rate has kept reaching new highs over the years, This time it’s a little different because of the timing.
Three months ago, Bitcoin saw its third reward reduction for every block mined or halved in its history. Due to the fixed supply of 21 million, the average at which the remaining supply is reduced is halved every four years.
Such as, Miners earn 50% less Bitcoin every four years. despite increasing expenses for electricity and various operating costs.
In theory, an increase in Bitcoin price should offset the lower number of profits made by BTC miners. However, the price of BTC would have to double in the short term to make mining more attractive.
The quick recovery of the hash rate from halving and a difficulty at an all time high suggest miners expect a strong short-term bitcoin price trend.
Another reason for the hash rate surge could be the profitability of miners in China. Sichuan Province is currently experiencing its rainy season and the abundance of hydropower plants in the area allows miners to get cheaper electricity, which in turn lowers their overall costs.
The CEO of Mining business, JP Baric, said::
“The profits from mining Bitcoin with the latest hardware are between 70 USD / MWh and over 200 USD / MWh, depending on price, global hashrate and difficulty. Energy is currently being generated in a natural gas plant at a price of USD 17 per MWh. Do the math. “
Cheapest electricity flow conflict in China and miners’ optimistic attitude towards the BTC price They seem to be catalyzing the hash rate.
Sarcastically assume that the mining sector is nowhere near surrendering, Rafael Schultze-Kraft, Technical Director of Glassnode, said::
“The level of difficulty increased by 9%. Mining Surrender “.
The term “Surrender in mining” refers to the phase when the majority of small and overfunded miners cease their activities. Surrender could cause Bitcoin’s hash rate to drop significantly in the short term, but Bitcoin’s hash rate hasn’t dropped noticeably since May.
Does an increasing hash rate correspond to lower selling pressure?
Willy Woo, a chain analyst, He previously said that miners are one of the two main sources of external selling pressure on the price of Bitcoin. When miners sell BTC, they tend to put significant pressure on the cryptocurrency market.
According to the mining difficulty trend and hash rate Miners are unlikely to sell large amounts of BTC in the short term.
Unless the price of BTC drops dramatically to a point where miners cannot sustain their business for a while, the mining sector’s momentum is likely to remain strong.