Data shows that bitcoin's mining hash rate has dropped by almost 10% from the recent all-time high (ATH). Here's what could be behind this trend.
bitcoin mining hash rate has seen a sharp drop recently
“Mining hashrate” is a metric that keeps track of the total amount of processing power that miners as a whole have connected to the bitcoin network. The metric is measured in terms of hashes per second (H/s) or, more practically, terahashes per second (TH/s).
Since btc operates on a Proof of Work (PoW)-based consensus mechanism, miners naturally harness this computational power to solve mathematical problems and compete with each other for a chance to add the next block to the network.
The incentive to compete on the network in this way is that the miner who adds the next block receives the block reward, a combination of transaction fees and the block subsidy, as compensation.
Therefore, for any miner, mining is only profitable if this reward exceeds the cost of electricity they spend on running their facilities. Whether miners in general are under stress or in a comfortable situation at the moment can be deduced from the trend in the mining hash rate.
When the value of this indicator increases, it means that new miners are joining the network and/or old ones are expanding their capabilities. This trend implies that the blockchain looks lucrative for these chain validators.
On the other hand, the metric registering a decrease suggests that some of the miners no longer find btc mining profitable, so they have decided to disconnect from the network.
Now, here is a chart showing the trend in the 7-day average bitcoin mining hashrate over the past year:
<img decoding="async" class="alignnone wp-image-322453 size-large aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/09/Bitcoin-Hash-Rate-Drops-10-After-Hitting-ATH-But-Why.png" alt="bitcoin Hash Rate” width=”980″ height=”412″ srcset=”https://bitcoinist.com/wp-content/uploads/2024/09/chart_3625d6.png?w=1387 1387w, https://bitcoinist.com/wp-content/uploads/2024/09/chart_3625d6.png?w=640 640w, https://bitcoinist.com/wp-content/uploads/2024/09/chart_3625d6.png?w=768 768w, https://bitcoinist.com/wp-content/uploads/2024/09/chart_3625d6.png?w=980 980w, https://bitcoinist.com/wp-content/uploads/2024/09/chart_3625d6.png?w=750 750w, https://bitcoinist.com/wp-content/uploads/2024/09/chart_3625d6.png?w=1140 1140w” sizes=”(max-width: 980px) 100vw, 980px” data-recalc-dims=”1″/>
Looks like the 7-day value of the metric has plunged in recent days | Source: Blockchain.com
As shown in the chart above, the 7-day average of the bitcoin mining hash rate had seen a surge earlier in the month and had set a new all-time high above 693 TH/s. However, in the week since this peak, the indicator has seen a rapid decline of almost 10%, bringing its value down to 628 TH/s.
The answer to why this trend has occurred could lie in the recent price development of btc. As mentioned above, miners earn their income through the block reward, which is made up of transaction fees and the block subsidy.
Of these twoThe block subsidy constitutes The main part of their income. A feature of the blockchain is that the block subsidy remains fixed in btc value and is also awarded at a fixed time interval, meaning the only variable related to it is the coin price in USD.
Therefore, btc miners’ revenue directly correlates to the spot value of btc. That’s why the previous spike in hashrate to ATH was surprising, as bitcoin was falling when it happened.
Miners may have been betting that the price would recover in the near future, but since that clearly hasn’t happened, they have decided to take some machines offline, which is why the 7-day average Hashrate has seen such a steep drop.
btc Price
At the time of writing, bitcoin is trading at around $58,600, up more than 6% from last week.
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The price of the coin appears to have overall moved sideways in the past month | Source: BTCUSDT on TradingView
Featured image by Dall-E, Blockchain.com, chart by TradingView.com
