Although the global crypto market has slumped since Bitcoin hit an all-time high in price in November 2021, Bitcoin’s hashrate continues to break records in January.
Bitcoin Hashrate and Difficulty Continues to Grow
Source: Bitinfocharts
Bitcoin network average hashrate exceeded 190.71 exahash per second (EH/s) and mining difficulty surpassed 26.64 trillion in January, according to BTC.com, registering a new all-time-high in Bitcoin mining history. Rising figures of mining hashrate show that crypto mining communities are confident in the future of Bitcoin despite the recent market downturn.
Bitcoin network hashrate witnessed substantial and steady growth in the past decade. With the invention of specialised rigs, namely ASIC miners, Bitcoin mining has become a highly lucrative and industrialised business. It has faced criticism of being too centralised as rig manufacturers are mostly based in one country, which once controlled a vast majority of the network hashrate. China officially banned Bitcoin mining and the hashrate based in the country dropped significantly. After the ban, countries like the United States of America, the Russian Federation, and Kazakhstan saw a significant increase in Bitcoin mining hashrate.
Does Hashrate Affect the Price of Bitcoin?
Unlike many altcoins which are mostly based on Proof-of-Stake consensus mechanisms, Bitcoin runs on a Proof-of-Work (Pow) consensus mechanism and hashrate changes are considered as important indices for the prosperity of the crypto market. How many Bitcoin can be mined each day is a combined result of three different variants: the hashrate of every rig, the whole network hashrate, and daily Bitcoin output.
Though currently there is no solid evidence to prove that changes in hashrate or mining difficulty affect the price of Bitcoin directly, on-chain data analysts including Plan B and Willy Woo have worked to explore more possible explanations. Crypto miners, especially institutional ones who hoard Bitcoin, may create a dramatic sell-off hence reducing the price, but what is worth paying attention to is that the production cost of mining Bitcoin is volatile and Bitcoin miners are usually firm hodlers. Therefore, it is hard to conclude that the changes of hashrate will lead to dramatic price changes, though it proves that miners’ belief in Bitcoin is growing amid a crypto market showing multiple bear signs.