Why Bitcoin Hashrate Has Barely Moved Since May

Data shows that the Bitcoin mining hashrate has been moving sideways since five months now as miners’ earnings remain low.

Bitcoin Mining Hashrate has not moved much since five months ago

According to the latest weekly report from Arcane Research, the BTC hashrate right now is at the same level as in May of this year.

“Mining hashrate” is an indicator that measures the total amount of computing power currently connected to the Bitcoin network.

The hashrate can be thought of as the degree of competition between the individual mining rigs online on the BTC blockchain.

Therefore, when the value of this metric is high, it means that miners are facing higher competition on average at the moment.

This concept of competition arises because of the “mining difficulty” of the network. One feature of the BTC blockchain is that the block production rate (or simply the frequency of transactions handled by the miners) generally remains constant.

However, when the hash rate changes, this also blocks the production rate. For example, if the hash rate goes up, transactions are hashed faster as there is now more power to handle them.

In order to take the block production rate back to the constant that the chain wants, the network increases the aforementioned mining difficulty. And likewise, if the opposite were the case, it would have made a negative difficulty adjustment instead.

Now, here is a chart showing the Bitcoin mining hash rate trend over the past year:

Looks like the value of the metric hasn't shown much movement in recent days | Source: Arcane Research's The Weekly Update - Week 32, 2022

As you can see in the graph above, the Bitcoin mining hash rate seemed to be on a constant upward trend, until May of this year.

After May, while the indicator has gone up and down constantly, the general trend has been sideways movement.

The main reason behind this trend is the difficult miner earnings. The BTC price has fallen a lot during this period, which means that miners’ USD income has been significantly less (miners pay their operating costs in USD, not BTC).

Another factor that comes into play here is that the hashrate actually has quite a large value right now. Because of this, the difficulty has been high, resulting in the miners who are unable to compete against others in expanding their rig capacity to receive a smaller portion of the block rewards.

As a result, miners who were already under pressure, such as those with high electricity costs and/or those with low-efficiency machines, have been forced to disconnect their machines.

This is why while the hashrate hit a new ATH during this consolidation, it couldn’t stay there for too long as miners started going offline. However, the hash rate falling off after that led to a reduction in difficulty, motivating some miners to bring their machines back online.

Naturally, that only led to a higher hashrate, and thus higher difficulty, which once again caused some miners to disconnect from the network. And in this way, both the hash rate and the difficulty have turned upside down, eventually forming a sideways trend.

BTC price

At the time of writing, Bitcoin’s price is hovering around $23.5k, down 5% in the last week. Over the past month, the crypto has risen 13% in value.

The value of BTC has been going down in the last few days | Source: BTCUSD on TradingView

Featured image from Brian Wangenheim on Unsplash.com, charts from TradingView.com, Arcane Research