Bitcoin hasn’t had a great year. At the time of writing, Bitcoin is at $6476 with a market capitalization of $112,281,350,326 according to CoinMarketCap. Despite the negative sentiments in the Crypto market, the hash rate of Bitcoin tells a completely different story.
What is the Hash Rate?
A hash is defined as the output of a hash function. In the case of Bitcoin, the hash rate is the speed at which a Bitcoin mining machine operates. As Bitcoin mining involves the discovery of blocks through difficult and complicated mathematical puzzles, thousands of guesses and calculations are needed to be done by the processor. Thus to effectively mine a block, the miner needs to hash the block’s header so that it’s below or equal to the target. The amount of attempts taken per second is known as the hash rate.
The hash rate, miner’s profits, and difficulty levels are all interlinked. As the difficulty of mining rises, the hash rate also increases. The difficulty of mining tends to rise due to various reasons such as the number of total miners which leads to higher competition.
What does a High Hash Rate for Bitcoin signify?
Blockchain.info, a website which portrays charts of Bitcoin’s statistics proves that even though the overall market price of Bitcoin is falling, the hash rate is seen to be significantly rising. This suggests that miners are still very much interested in mining Bitcoin even though the price of Bitcoin is on the decline. So it seems that miners are taking a long-term view, ignoring short-term downtrends in the market.
If the hash rate were to be falling in congruence with price, then there would be cause for concern. That would tell us that miners are less interested in mining Bitcoin and could be turning their focus to mining other cryptocurrencies or not mining at all.
The data suggests that network support is very strong and will probably continue to grow. Since miners are arguably the most important asset to the Bitcoin ecosystem, the chart suggests that Bitcoin has very strong fundamentals and will probably bounce back in the near future.
Mining Equipment Technology
Note that another reason for hash rate rising may not be the increase in overall competitiveness of miners but instead technology of mining equipment improving.
What is being observed is an improvement in miners as not many can afford the more technically advanced mining equipment. Hence leading to an overall fall of inefficient miners and maintaining a ‘only the tough will survive’ atmosphere.
Whatever the reasons may be, whether it is miners of Bitcoin increasing in numbers or mining firms investing in better mining equipment, it all points towards a bullish signal for Bitcoin from a fundamental point of view.