On-chain data shows that Bitcoin mining hashrate rebounded strongly from its post-halving lows and hit a new all-time high (ATH).
The 7-day average Bitcoin mining hashrate just set a new ATH
The Bitcoin network operates on a consensus mechanism known as “proof of work» (PoW). In this system, validators called miners compete using computing power for the opportunity to add the next block to the blockchain.
THE “mining hashrate” refers to a measure of the total computing power that miners currently have connected to the network for this purpose.
When the value of this metric increases, it means that either existing miners are expanding their facilities or new miners are joining the chain. Such a trend implies that these validators currently find the network attractive.
On the other hand, the downward trend in the indicator suggests that some mines have decided to disconnect from the network, perhaps because they believe the chain is not profitable to mine.
Now here is a chart that shows 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 seen in the chart above, the 7-day average Bitcoin mining hashrate began to decline after setting a new ATH last month. The pullback intensified during the first two weeks of this month, bringing the indicator to significantly lower levels.
This strong downward trajectory of the indicator is due to a major event that occurred on the network last month: the fourth halving. Halvings are periodic events that occur every four years and permanently halve BTC block rewards.
The block rewards that miners receive for solving blocks on the network are one of the two main components of their revenue. The other part of their revenue, transaction fees, has always been quite small compared to block rewards, so the latter is essentially their main source of revenue.
It is therefore not surprising that some miners living in areas with high electricity prices and using inefficient mining rigs are going offline as the economic effects of the halving are felt.
But then a question arises: if there had already been three halving events in the history of the asset before this one, how did the hashrate continue to grow to reach new highs if were miners’ incomes continually reduced?
Two factors explain this. The first is that mining rigs have become more efficient over the years, allowing miners to accommodate more power while consuming less energy.
The other, and perhaps more important, is that the price of the coin has increased overall over its history. Although block rewards remain fixed in BTC value until the halving is performed, their USD value still naturally fluctuates with the spot price.
Time and time again, rising prices have helped offset miners’ loss of revenue from the halving. Recently, the price has shown some recovery and as the hashrate chart shows, the metric has also rebounded at the same time.
It would appear that miners were happy enough with this increase in revenue resulting from the rally that they moved their computing power to an entirely new ATH.
BTC Price
At the time of writing, Bitcoin is trading at around $68,000, down more than 3% over the past week.
Looks like the price of the asset has been going up over the last few days | Source: BTCUSD on TradingView
Featured image of Dall-E, Blockchain.com, chart from TradingView.com
