On-chain data shows that Bitcoin mining hashrate continues to decline, as the price of the cryptocurrency also falls.
7-day average Bitcoin mining hashrate down more than 8% from all-time high
“Mining hashrate” refers to 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 represent the current state of BTC miners.
When the value of the indicator increases, it means that new miners are joining the network and/or old miners are expanding their facilities. Such a trend means that the chain looks attractive to in-chain validators.
On the other hand, a drop in the metric suggests that some miners have decided to disengage from the network, possibly because they no longer find BTC mining profitable.
Now, here is a chart that shows the trend in the 7-day average Bitcoin mining hashrate 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 graph above, the 7-day average Bitcoin mining hashrate reached a new all-time high (ATH) late last month but has seen a steady decline since then.
The ATH occurred when BTC’s price was bullish, and a drop in the metric coincided with a bearish period for the cryptocurrency. The reason behind this close relationship is the fact that miner revenue is highly tied to the asset’s price.
These chain validators earn their income from two sources, transaction fees and block subsidy, but historically the latter has dominated their revenue.
The block subsidy, which miners receive as compensation for solving blocks on the network, is paid at a fixed BTC price and at more or less fixed time intervals. This means that the only variable related to it is the USD value of the cryptocurrency.
When the value of the asset increases, the value of these rewards also increases, and therefore, the miner’s revenue also increases. Thus, miners follow the coin’s trajectory when it comes to adding or removing hashrate.
Interestingly, however, when Bitcoin first recovered above the $62,000 level, there was no reversal in the hashrate, possibly because miners did not think the surge would last long. In fact, they may be right, as the asset has retraced some of its recovery over the past day.
One consequence of the continued mining hashrate reduction is that the network sees a negative difficulty change at its next scheduled adjustment.
The next estimated change in the BTC mining difficulty | Source: CoinWarz
Difficulty is a feature of the Bitcoin blockchain that controls how much difficulty miners will have to work on the network. The existence of difficulty is what allows the block subsidy to be given out at fixed intervals.
When miners add hashrate, they naturally become faster at mining, and thus, they create blocks at a faster rate. To counteract this, the network increases the difficulty enough to slow miners down to the standard rate of 10 minutes per block.
Since miners recently reduced their hashrate, block times have become slower than usual. The Bitcoin blockchain will now reduce the difficulty by more than 4% to make things easier for validators.
BTC Price
At the time of writing, Bitcoin is trading at around $59,700, up more than 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 Dall-E from Blockchain.com, chart from TradingView.com
