Bitcoin continues to show strength on its mining network, with hashrate (computing power) hitting a new all-time high. The increase in processing power for mining the world’s largest cryptocurrency reflects the growing interest of large companies in mining the digital currency.
When the hashrate increases, it indicates that more miners are entering the market, connecting their machines to the network and participating in the process. In addition, it may indicate an increase in the price of the digital currency.
This trend suggests that miners are cashing in. On the other hand, when the hashrate drops, it may indicate that some miners are leaving the network, possibly due to lack of profitability.
The increase in Bitcoin mining difficulty is a direct reflection of the continued increase in the number of mining machines competing to protect the network. According to data from the website CoinWarz.com, Bitcoin mining difficulty reached the historic milestone of 51.23 terahash per second (TH/s).
Why did the mining difficulty skyrocket?
One of the factors driving the increase in bitcoin mining difficulty is the recent rise in transaction fees, which has boosted mining profitability as miners not only receive the rewards spent for each block mined, but but also part of the transaction costs.
The increase in fees is related to the explosion of activity on the Bitcoin blockchain due to the introduction of the Ordinals protocol, which introduced the functionality of subscriptions directly to the Bitcoin network, enabling the issuance of NFTs and BRC-20 tokens became possible.
This has led to increased demand for block space on the network, resulting in higher rates. The resources of the Ordinals protocol are in the early stages and there is still a lot of room for growth in the area.
The continued demand for logins and transactions on the Bitcoin network has encouraged more miners to join the network. The improved revenue due to the price increase of Bitcoin and higher transaction fees has been one of the main reasons for the increase in the hashrate.
Also the prospect of a halving next year, a halving of the block reward, could also be a factor of uncertainty for miners, but historically the price of Bitcoin has performed well during this period.
How Does Mining Trouble Affect Bitcoin Price?
Mining problems are a key feature of the Bitcoin network, designed to maintain the steady pace at which miners work on the network. This is necessary to ensure that the new coin production rate is kept constant.
The increase in Bitcoin’s hashrate and the resulting increase in mining problems are positive indicators for the network. They reflect miners’ confidence in the cryptocurrency and the Bitcoin bull market.
With more miners joining the network, Bitcoin’s security and resilience is bolstered.
In the period from 2017 to 2021, Bitcoin has undergone some significant changes in terms of prices and hashrate. It is important to point out that the price of Bitcoin is influenced by several factors, and while there is a general correlation between hashrate and price, it is not a direct or linear relationship.
However, history tells us that the price of Bitcoin tends to follow the hashrate, as the more expensive it becomes to mine a Bitcoin, the price is ultimately reflected in the market.
For example, Bitcoin reached an all-time high of $20,000 at the end of 2017. The hashrate also increased during this period, reaching new highs as more miners entered the network to take advantage of the high Bitcoin prices.
However, after the price spike in 2017, the market went through a prolonged correction phase, with Bitcoin’s price falling significantly in 2018 and 2019. During this period, the hashrate also experienced fluctuations, but generally continued to rise as the Bitcoin network continued to generate interest and attract investment.
In 2020, the Bitcoin price started to recover gradually and the hashrate also continued its upward trajectory. The hashrate increased significantly in mid-2020 and continued to reach new highs in 2021.
However, in the second quarter of 2021, a major event that affected both the Bitcoin price and the hashrate occurred: the ban on mining activities in China.
This action resulted in a sharp drop in Bitcoin’s global hashrate as many Chinese miners were forced to shut down their operations. This hashrate reduction was accompanied by a price correction, with Bitcoin reaching a low of around $30,000 in July 2021.
Since then, both the price and the hashrate have recovered somewhat. The hashrate has risen again with the recovery of mining activity in other regions outside of China, and the Bitcoin price is showing signs of recovery.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
