Bitcoin Hash Rate Spikes by 100% Amid Downturn

Bitcoin’s hash rate – the amount of computing power consumed by the network to create new coins – continues to surge in spite of the half-year downturn in prices, fanning expectations for an eventual rebound in the not-so-distant future.

Bitcoin’s Soaring Hash Rate

The yearlong bull market for bitcoin generated a large influx of new miners to the network. According to a new report from CoinJournal, interest in mining continues to grow at an exponential rate.

Over the last four months, bitcoin’s hash rate has surged 100% even as the bitcoin price fell by a third.

In June, the hash rate securing the Bitcoin network surpassed 40 EH/s, up from just 13 EH/s during last year’s peak.

Since the end of 2017, the hash power that has come online is equivalent to 2 million SHA-256 ASIC. Each of these units costs roughly $1,800. That’s $3.6 billion in tangible value added to the blockchain economy directly.

A Bullish Signal

Bitcoin’s rising hash rate is perhaps the most poignant signal that the market’s long-term trajectory remains positive. The network’s ever-expanding computing power suggests miners are still committed to bitcoin despite its 70% correction since December.

Miners are sticking with bitcoin even as the cost of creating a single coin continues to rise. Depending on who you ask, bitcoin’s mining rate is currently hovering between $6,000 and $7,000. That figure is expected to reach $9,000 by year’s end as mining difficulty increases.

Although miners are barely breaking even at today’s prices, a historical analysis of the bitcoin price against the cost of mining suggests values could rise significantly in the intermediate term. That’s because bitcoin usually trades at 2.5 times the mining rate. Based on this historical reference point, bitcoin’s fair market value from a mining perspective could reach $22,500 by the end of the year.

That said, the relationship between hash rate and the bitcoin price is inelastic given the time it takes to prepare a new ASIC mining rig for action. This typically results in a delay between prices and increased hash rate.

As Hacked reported earlier this week, competition among manufacturers of mining equipment – think Bitmain, Ebang, Canan Creative – is growing exponentially as companies battle for dominance. At least two of the three aforementioned Chinese companies have announced plans to list shares on the Hong Kong Stock Exchange with the third and largest among them – Bitmain – signaling it is “open” to the idea of an initial public offering.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi

Leave a Reply