On-chain data shows that Bitcoin mining hash rate has continued to decline as the price of the cryptocurrency itself has suffered a setback.
Average Bitcoin mining hashrate has dropped by over 8% in the last 7 days since the all-time high
The “mining hashrate” is an indicator that tracks the total amount of computing power that miners currently have connected to the Bitcoin blockchain. This metric is generally considered to be representative of the current situation of BTC miners.
When the value of the indicator increases, it means that new miners are joining the network and/or old ones are expanding their facilities. Such a trend means that the chain seems attractive to these chain validators.
On the other hand, a drop in this value suggests that some miners have decided to disconnect from the network, possibly because they no longer consider BTC mining profitable.
Here is a chart showing the trend of the 7-day average hashrate in Bitcoin mining over the past year:
Looks like the 7-day average value of the metric has gone through a decline in recent days | Source: Blockchain.com
As shown in the chart above, the 7-day average hashrate of Bitcoin mining had risen to a new all-time high (ATH) towards the end of last month, but has been on a steady decline since then.
The all-time high occurred when the BTC price was rising, and the decline in the metric coincided with a period of bearish momentum for cryptocurrencies. The reason for this close relationship is the fact that miners’ revenue is heavily tied to the price of the asset.
These chain validators generate their revenue from two sources: transaction fees and block subsidies, with the latter having dominated their revenue in the past.
The block subsidy that miners receive as compensation for solving blocks on the network is issued at a fixed BTC value and also at a more or less fixed time interval. This means that the only variable associated with it is the USD price of the cryptocurrency.
As the value of the asset increases, so do the rewards and hence the revenue of the miners. Therefore, miners tend to follow the trend of the coin when it comes to adding or removing hashrate.
Interestingly, however, despite Bitcoin having previously rallied above the $62,000 mark, no reversal in hashrate occurred, perhaps because miners did not believe the surge would last. In fact, they may have been right, as the asset has lost some of its recovery over the past day.
One consequence of the constant decline in mining hashrate is that the next scheduled network adjustment is likely to result in a negative difficulty change.
The next estimated change in the BTC mining difficulty | Source: CoinWarz
Difficulty is a feature of the Bitcoin blockchain that controls how difficult it is for miners to mine on the network. The existence of difficulty allows the block subsidy to be paid out at fixed intervals.
As miners increase the hashrate, they will naturally become faster at mining and thus produce blocks at a faster pace. To counteract this, the network increases the difficulty just enough to slow miners down to the standard rate of 10 minutes per block.
Since miners have been reducing their hashrate recently, block time has been slower than usual. The Bitcoin blockchain will now lower the difficulty by over 4% to make things easier for validators.
BTC Price
At the time of writing, Bitcoin is trading at around $59,700, up over 19% over the past week.
The price of the asset appears to have gone down over the last day or so | Source: BTCUSD on TradingView
Featured image by Dall-E, Blockchain.com, Chart by TradingView.com
