While Bitcoin’s price hovers around $30,000, the network’s underlying fundamentals—Bitcoin mining difficulty and hash rate—continue to break records. Despite its current price struggles, these new milestones suggest a promising future for cryptocurrency.
Bitcoin’s recovery in 2023 has offered more than just a boost in price action; it has also brought about a significant turnaround for miners.
As the BTC/USD pair gained 70% in the first quarter alone, struggling mining participants experienced much-needed relief following a bear market that nearly obliterated their profit margins.
The revival of miners is most evident in the mining difficulty, which, among other factors, indicates the competition for block subsidies.
Over the past two months, this metric has consistently reached new all-time highs. According to data from BTC.com, the difficulty is set to increase by approximately 2.1% on April 20, reaching a staggering 48.91 trillion.
Moreover, the Bitcoin network’s hash rate—an indicator of the computing power used to secure the network—is estimated to be higher than ever. Raw data from MiningPoolStats reveals an all-time high of 418 exahashes per second (EH/s) on April 18.
However, it’s essential to note that hash rate estimates can be unreliable and potentially misleading. Consequently, there have been calls to reevaluate how this metric is measured and reported by those looking to draw bullish conclusions about BTC price strength.
Despite these concerns, some experts monitor the hash rate closely, adhering to the adage that “price follows hash rate.” The increasing hash rate signifies a growing interest in Bitcoin mining activities worldwide.
One noteworthy development is Russia’s increased mining activity over the past year. According to a report in the Russian-language news outlet Kommersant, Russia has become the world’s second-largest miner in 2023. This growth has raised concerns about governments wielding significant hash rate control, potentially pressuring miners to censor transactions.
However, others argue that the real “danger” lies in using the hash rate for its intended purpose—earning Bitcoin. For example, Pierre Rochard, Vice President of Research at Riot Platforms, recently commented on this issue, stating that “adversaries hypothetically using hashrate to censor #btc transactions is a distraction from adversaries using hashrate to earn #btc revenue.”
An examination of miner balances over the past 30 days reveals increased Bitcoin sales. On April 18, miners’ Bitcoin holdings decreased by 648 BTC compared to one month ago, as per data from Glassnode. These changes represent a significant shift from the sell-offs that followed the FTX implosion in Q4 of the previous year.
The record-breaking surge in Bitcoin mining difficulty and hash rate demonstrates the network’s resilience and potential for future growth, despite the current stagnation in price. However, as mining activities continue to expand globally, it remains to be seen how these underlying fundamentals will impact the cryptocurrency’s value in the long run.
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