Bitcoin Hashrate Retraces 11% Since Late November, Could It Reach New ATH?

Data shows that the Bitcoin mining hash rate has increased by 11% since the end of November; can the calculation keep this up and set a new all-time high?

Bitcoin Mining Hashrate Continues to Rise, Approaching ATH

“Mining hashrate” is an indicator that measures the total amount of computing power connected to the Bitcoin blockchain. When this metric observes an increase, it means that miners are bringing more machines online on the network, showing that they find the chain attractive right now. On the other hand, a decline suggests that some miners are leaving the blockchain, probably because they don’t find the coin profitable enough to mine at the moment.

Now, here is a chart showing the trend of the 7-day average Bitcoin mining hashrate over the past six months:

Looks like the metric's value has been rising in recent days | Source: Blockchain.com

As the graph above shows, the 7-day average Bitcoin hashrate was at an all-time high of 273 million terahashes per second (TH/s) at the beginning of November, but by the end of the month the calculation had plummeted to just 234 million TH/s. However, in December, the indicator has seen a sharp decline of around 11%, as the value has now risen to around 261 million TH/s.

The reason behind these changes in the hashrate lies in the concept of Bitcoin mining difficulty. A feature of the BTC network is that the rate at which miners produce new blocks (or, more simply, handle new transactions) remains largely constant. Naturally, changes in the hash rate deviate this speed from the blockchain default value, since after a hash rate change miners have a different amount of available computing power, and thus mine at a different speed.

To counteract such deviations and bring the block production rate back to the chain’s desired constant, the Bitcoin network protocol changes its “mining difficulty”, making it harder or easier (depending on the hashrate change) for miners to mine BTC. The chart below shows how the difficulty has changed recently.

The indicator seems to have taken a large hit recently | Source: Blockchain.com

From the graph, it is clear that the difficulty also sets an ATH at the same time as the hash rate peaks. Since the mining rewards remain mostly the same, the high difficulty means for individual miners that their shares are getting smaller (as they are divided into a larger hashrate pool now).

Miners had already been under tremendous pressure in this bear market, so the difficulty explosion was enough to make mining unprofitable for some of them. This is why the hashrate plunged after the rise; the underwater miners pulled their machines offline. But since the hashrate suddenly dropped to such a large extent, the network had to respond by adjusting the difficulty down as well.

With this lower difficulty, the Bitcoin hashrate has once again begun to climb as miners take advantage of the higher margins. The calculation is now approaching ATH. However, it is uncertain whether the indicator can actually reach a new high, as the next difficulty adjustment is estimated to take place in approx. 3 days, which will surely make mining much more difficult again, thus limiting hashrate growth in the same way that the last difficulty level rise did.

BTC has already declined from the high | Source: BTCUSD on TradingView

At the time of writing, Bitcoin’s price is hovering around $17,000, down 1% in the past week.