Tom Strass from Fundstrat shows the Hashrate for bitcoin mining 2 times since May despite a 70% decline in prices

Tom Strass from Fundstrat shows the Hashrate for bitcoin mining 2 times since May despite a 70% decline in prices

Despite the strong downward momentum recorded in the cryptocurrency market, led by Bitcoin, from reaching the historical highs to the beginning of the year, the hashing rate of Bitcoin has increased since May 2018. Research conducted by Fundstrat, a Wall Street-based investment company led by Tom Lee, indicated that Bitcoin's hash mining power had doubled during the period.

The bitcoin hash rate doubles since May

Bitcoin mining and other cryptocurrencies require a hash power that measures the difficulty of extracting the coin. The difficulty of mining is a representation of how difficult it is to find a hash below a given target, changes based on the hash rate of the dominant cryptocurrency.

To simply point out the consequences of the difficulty in mining, more people who extract Bitcoin increase the hash rate of the network thus increasing the difficulty of extraction. The opposite is true also because less people who extract Bitcoin reduces the rate of hashes so the difficulty of extracting Bitcoin decreases.

Despite this, miners calculate their profits using the hash rate that signals revenue for these miners. Revenue from cryptocurrency activities is heavily influenced by the volatility of this difficulty in mining, as the BTC premium incentives change every year. High difficulty in the extraction of BTC means that the miners will have to face difficulties in finding blocks to verify a decrease in their income.

"Despite the BTC bear market, the hash power doubled from May to 57 EH / s – Even with upgrades to existing equipment, it implies almost 1 GW of new power consumption compared to 5.2 GW in May & # 39; The draw now $ 7300 ($ 5300 in BE cash) against $ 6000 in May "

Sam Doctor from Fundstrat said.

Increase in the rate of hashes, fall in prices

Considering a scenario in which the remuneration of the BTC mining remains the same over the course of four years and yet the hash rate increases, the difficulty in BTC mining will increase and therefore fewer coins will be available for these miners and mining centers. Although mining difficulties cause a decrease in revenue for miners, the fall in cryptocurrency prices has a strong impact on the revenues generated by these miners and mining centers.

Bitcoin has suffered huge losses since February, as it has lost almost 80% of its value to date. As the price of BTC rose above $ 20,000 USD at the end of the year, a simultaneous increase was seen in Bitcoin's hash mining rate. However, since May, when Bitcoin prices have had a strong bearish run, the Bitcoin hash rate has more than doubled.

The exponential increase in mining power shows the willingness of miners to continue expanding their holdings in the Bitcoin mining sector even when profits made during the bear market are lower than expected. A search by BitMEX showed that the world's largest cryptocurrency company, Bitmain, has accepted low profit margins from mining to increase market share and dominance.

By lowering profits by increasing the hash rate, Bitmain will block competition from the market as low sales cause financial difficulties for small businesses. The strategy has discouraged many investors from taking the mining route, opting instead to raise an initial public offering as a successful IPO could increase the available firepower to continue this strategy and eliminate an advantage rivals could have by doing before their IPOs.

Separation blow

With the increase in Bitcoin hash mining rates as money prices fell, the blockchain protocol became stronger, safer and more resistant to external attacks. Bitcoin enthusiasts feel the positivity to see the increase in the hash rate in a bear market as it shows that miners are willing to cut profits to continue blockchain operations.

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