Bitcoin Prices Plunge, Will Miners Start Shutting Down Rigs?
Bitcoin prices are under tremendous selling pressure at the time of writing on April 20. It comes as mining difficulty and hash rate rise to record highs.
Bitcoin prices are falling
BTC is trading at around $28,100, down about 7% from its April highs. Also, looking at the performance on the daily chart, it looks like bears are pushing in, anchoring the April 19 bear candle.
Losses on April 19 were deep and reversed refreshing gains from earlier this week. The resulting bar also had decent trading volumes, suggesting traders were eager to sell.
Currently, BTC is trading below key resistance levels established in April. Currently, $31,000, which marks the April 2023 and H1 2023 highs, remains a crucial reaction point that chartists are watching closely.
The April 20 price drop also forced Bitcoin below its 20-day moving average, or middle BB, for the first time since March 13. On this day, BTC prices rose as the US banking crisis followed the bank. run by Silicon Valley Bank (SVB), given a tailwind.
The March 13 rally may have provided an anchor that saw BTC rally over 55% from mid-March to $31,000 in early April.
Hashrate and mining difficulty at record high levels
With Bitcoin prices falling after a 90% increase from December 2022, the hash rate and difficulty have increased.
Hash rate is a measure of computing power channeled by miners to secure the Bitcoin network and ensure that all transactions included in a block are valid.
Miners are special units that operate special equipment that supplies computing power to the network. This is because Bitcoin is a proof-of-work blockchain and relies on a community of miners for decentralization and security.
The difficulty is hash rate dependent and is set at a protocol level. It determines how easy or difficult a miner can confirm transactions and add a block to the blockchain approximately every 10 minutes.
Currently, the Bitcoin hash rate is stands of over 355 EH/s, and record high. Miners seem unfazed by prices and continue to use equipment despite falling prices. This has been the trend in the first four months of 2023, when the hashrate rose from 253 EH/s on January 1 to today’s level.
Due to the direct correlation between hash rate and difficulty, miners find it difficult to mine new blocks and must upgrade their chipsets to efficient versions to remain competitive.
In the last five sessions, the Bitcoin network has adjusted difficulty level up to 48.71T, with last adjustment on 20 April. This year alone, Bitcoin difficulty has increased by 41%; which means miners have to use more computing power to discover blocks.
As the hash rate and price diverge, it remains to be seen whether miners would have to temporarily shut down their rigs and save on operating costs.
Feature image from Canva, chart from TradingView
