Data shows that Bitcoin Mining Hashrate has dropped by almost 10% since its recent all-time high (ATH). This could be behind this trend.
Bitcoin Mining Hashrate Has Seen a Steep Drop Recently
The “My hashrate” is an indicator that tracks the total amount of computing power that miners as a whole have connected to the Bitcoin network. The metric is measured in terms of hashes per second (H/s) or, more practically, in terahashes per second (TH/s).
Because BTC runs on a consensus mechanism based on the Proof of Work (PoW)Miners naturally use this computing power to solve mathematical puzzles and compete with each other for a chance to add the next block to the network.
The incentive to compete on the network in this way is that the miner who adds the next block receives the block reward, a combination of the transaction fee and the block subsidy, as compensation.
So for each miner, mining is only profitable if this reward outweighs the electricity costs they have spent on running their facilities. Whether miners as a whole are under stress or are in a comfortable position can be deduced from the trend in the Mining Hashrate.
When the value of this indicator goes up, it means that new miners are joining the network and/or old miners are expanding their facilities. Such a trend implies that the blockchain looks lucrative for these chain validators.
On the other hand, the metric that registers a decline indicates that some miners no longer find mining BTC profitable and have therefore decided to disconnect from the network.
Below is a chart showing the trend in the 7-day average Bitcoin Mining Hashrate over the past year:
Looks like the 7-day value of the metric has plunged in recent days | Source: Blockchain.com
As shown in the chart above, the 7-day average Bitcoin Mining Hashrate had seen a spike earlier in the month, setting a new ATH above 693 TH/s. However, in the week since this spike, the indicator has seen a rapid decline of almost 10%, bringing the value up to 628 TH/s.
The answer to why this trend has occurred could lie in the recent BTC price action. As mentioned earlier, miners earn their income through the block reward, which consists of the transaction fee and block subsidy.
Of these twothe block subsidy makes up the primary part of their revenue. A feature of the blockchain is that the block subsidy remains fixed in BTC value and is also issued at a fixed time interval, meaning that the only variable involved is the USD price of the coin.
The income of BTC miners therefore correlates directly with the BTC spot value. The previous increase in hashrate to ATH was therefore surprising, since Bitcoin was falling when it happened.
It is possible that miners were expecting the price to recover in the near future, but since that is clearly not the case, they decided to disconnect some machines from the network. This is why the average hashrate over 7 days has dropped so much.
BTC price
At the time of writing, Bitcoin price is trading at around $58,600, up over 6% over the past week.
The price of the coin appears to have overall moved sideways in the past month | Source: BTCUSDT on TradingView
Main image from Dall-E, Blockchain.com, chart from TradingView.com