Bitcoin mining hash rate has rebounded sharply from its post-halving lows and reached a new all-time high (ATH), according to on-chain data.
7-day average Bitcoin mining hashrate sets new ATH.
The Bitcoin network runs on a consensus mechanism called “Proof of Work” (PoW). In this system, validators, called miners, compete with each other using their computing power for a chance to add the next block to the blockchain.
“Mining hashrate” is a measure of the total computing power miners currently have connected to the network for this purpose.
When the value of this indicator rises, it means that existing miners are expanding their facilities or new miners are joining the chain. This trend means that validators are currently finding the network attractive.
On the other hand, indicators showing a downward trend indicate that some mines have decided to disconnect from the network. This is because we have discovered a chain that is potentially unprofitable to mine.
Now here is a chart showing the 7-day average Bitcoin mining hashrate trend over the past year:
The value of the metric seems to have been sharply going up in recent days | Source: Blockchain.com
As you can see in the graph above, the 7-day average Bitcoin mining hashrate has started to decline since the new ATH was set last month. The decline deepened in the first few weeks of this month, with indicators falling to noticeably lower levels.
The sharp downward trajectory of this indicator is due to the fourth halving, a major event that occurred on the network last month. Halving is a periodic event that occurs every four years and permanently reduces the BTC block reward by half.
Block rewards, which miners receive for solving blocks on the network, are one of the two main components of revenue. The other part of revenue, transaction fees, has historically been quite low compared to block rewards, so the latter has essentially been the main source of revenue.
So it is not surprising that some miners who live in areas with high electricity prices and use inefficient mining equipment will be disconnected due to the economic effects of the halving.
But one question arises. If there have already been three halving events in the asset’s history prior to this, how could the hashrate continue to increase to new highs if miner profits continue to come under pressure?
Two factors explain this. The first is that mining equipment has become more efficient over the years, allowing miners to host more power while consuming less energy.
Another, and perhaps more important, thing is that the price of coins has been rising across the board throughout history. Block rewards are pegged to the BTC value until the halving begins, but the USD value will still naturally fluctuate based on the spot price.
Time and time again, price increases have helped offset the loss of revenue for miners due to halvings. Recently, the price has shown some recovery, and as can be seen in the hash rate chart, the indicators have also rebounded.
Miners appear to have been sufficiently satisfied with the increased profits resulting from the rally that brought computing power to new ATHs.
BTC price
As of this writing, Bitcoin is trading at around $68,000, down more than 3% since last week.
Looks like the price of the asset has been going up over the last few days | Source: BTCUSD on TradingView
Dall-E, featured image from Blockchain.com, chart from TradingView.com