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Cryptocurrency News Articles
Bitcoin Hashrate Surges to Record High of 769.8 EH/s, But Price Retraces After Failing to Break $70K Resistance Level
Oct 23, 2024 at 07:55 pm
Bitcoin's network hashrate, a critical measure of its processing power and security, surged to an unprecedented 769.8 exahashes per second (EH/s) on October 21st.
Bitcoin's network hashrate hit a new all-time high on October 21, reaching 769.8 exahashes per second (EH/s), according to data from BitInfoCharts. This marks a significant increase in the computational power dedicated to securing and processing transactions on the Bitcoin blockchain. A higher hashrate generally makes the network more resistant to attacks, as it would require a vast amount of energy and resources to manipulate the chain.
The rising hashrate is largely attributed to the expanding presence of publicly traded mining companies in the Bitcoin mining landscape. These companies, such as Marathon Digital Holdings (NASDAQ:MARA) and Riot Blockchain (NASDAQ:RIOT), are leveraging their financial resources and economies of scale to deploy advanced mining equipment and increase their hashpower contribution.
However, despite this positive development on the network security front, Bitcoin's price faced some headwinds on October 22. After failing to break through the $70,000 resistance level, the cryptocurrency experienced a pullback. During U.S. morning trading, Bitcoin fell below $67,000, underperforming other major cryptocurrencies like Ethereum and Litecoin.
According to market analysts, this price pullback could be linked to rising interest rates in Western economies and the uncertainty surrounding upcoming U.S. earnings reports, which might be impacting the broader market sentiment and crypto prices.
The record-breaking hashrate, while a testament to the network's strength, also presents challenges for Bitcoin miners, especially smaller operations. As the hashrate increases, so does the computational difficulty of mining a Bitcoin block. This translates to higher operating costs for miners, particularly in the aftermath of the Bitcoin halving, which reduced block rewards.
Moreover, hashprice, a measure of Bitcoin mining profitability, experienced a brief surge in August, reaching $50 per petahash per second (PH/s), mainly due to a spike in transaction fees linked to the on-chain minting of the Runes protocol. However, mining profitability has since declined, and analysts from Jefferies are warning of a potentially challenging October for miners.
In other developments, data reveals that 12 of the largest public Bitcoin miners now collectively control close to 29% of the network's total hashrate. This highlights the growing dominance of these companies in the Bitcoin mining ecosystem, thanks to their ability to scale operations and access capital efficiently.
As the U.S. elections approach and broader macroeconomic factors continue to unfold, market observers are keeping a close eye on how these elements might impact Bitcoin's price trajectory and, consequently, mining profitability. The interplay between Bitcoin's price volatility, the evolving mining landscape, and macroeconomic developments will continue to shape the future of the cryptocurrency.
An age-old debate in the crypto community revolves around the relationship between Bitcoin's hash rate and its price movements. Some believe that price drives hash, while others maintain that the opposite is true. Here's a brief overview of both perspectives:
Christopher Bendiksen, Head of Research at CoinShares, presents a compelling view in his blog post titled "An Honest Explanation of Price, Hashrate & Bitcoin Mining Network Dynamics." According to Bendiksen, Bitcoin's hash rate is inherently tied to its price movements, albeit with a time lag.
In his analysis, as Bitcoin's price surges, the corresponding increase in hash rate lags due to the time miners need to procure and install more efficient hardware. As the price rises, block rewards become more lucrative, gradually enticing miners to upgrade their equipment. This process explains why hash rate increases often trail behind Bitcoin's price spikes.
Bendiksen also highlights that miners are paid in Bitcoin but incur operational costs in local currency. This dynamic means that miners won't expand operations or procure additional hash power unless the price of Bitcoin supports profitability. When mining becomes unprofitable, miners won't continue simply to “support the network” - they need economic incentive. Higher Bitcoin prices allow smaller miners to join the competition, pushing the network's hash rate higher as participation grows.
On the other hand, proponents of the “price follows hash” theory, like vocal Bitcoin advocate Max Keiser, present the opposite view, claiming that hash rate is the driving force behind Bitcoin's price movements.
Keiser, a firm believer in this perspective, frequently asserts that the Bitcoin price lags behind hash rate growth. Following a new all-time high in hash rate on July 8, 2020, Keiser tweeted, “The constant 10-minute emission schedule of #Bitcoin is the lure that will always attract miners – even acting irrationally – that pushes up hash rate with price following.”
For Keiser, the hash rate isn't just a technical measure of network health but a macro indicator of adoption and a growing rejection of traditional financial systems. However, the idea that miners would act irrationally or continue mining at a loss seems far-fetched
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