What’s Driving the Dramatic Rise in Bitcoin Hashrate?
Never mind the price, bitcoin’s hashrate keeps growing and growing. What does the phenomenon mean and why does it happen? Do miners know something we don’t? Or is there something else going on behind the scenes? That’s the question of the day in bitcoin and crypto circles. Our friends at Arcane Research recently took a crack at them in theirs The weekly update report, and we are here to analyze the case AR presented.
“Another all-time high for the Bitcoin hash rate last week, with a 7-day average of 267 EH/s. The biggest hard adjustment since May 2021 didn’t scare miners, with more machines online.”
After the adjustment, the bitcoin network resumed its speed of “6 blocks per hour – showing the power of these difficulty adjustments.” New machines came online, the system responded, the hashrate adjusted, fees went up, and bitcoin is back to normal, but with improved security. A beautiful ecosystem that works effortlessly, regardless of what is happening around it.
About the fees, The Weekly Update explains how they relate to the hash rate:
“As a result of fewer blocks being produced, competition to get transactions included has increased again, resulting in more fees generated for miners – up more than 25% in the last week.”
Okay, we figured out what happened. The question now is, why did it happen?
Possible reasons for the increase in hashrate
There are several theories floating around. Arcane Research has a fairly conservative perspective on the matter, which is probably a safe position to take. Information is scarce and there is an eerie air around the whole situation. According to The Weekly Update, “Bitcoin hashrate forms a 2022 peak at these heights.” Arcane Research recently published a bitcoin hashrate reportwhere they conclude:
“The hash rate growth is likely caused by US miners returning to full production after a summer of intermittent curtailment of operations as part of their participation in demand response programs.
Some factors indicate that the hashrate will continue to grow towards the end of the year. The public miners are expanding like never before, planning to plug in tens of thousands of mining machines by the end of the year.”
In a recent NewsBTC article, our sister site contained a Glassnode report that theorizes, “a new dynamic as more of the hash power is held by better capitalized publicly traded mining companies.” According to their analysis, huge bitcoin miners came to take over everything and eat everyone’s lunch. The recent hashrate increase is just a symptom of that.
“According to Glassnode, since bitcoin’s price is still flatlining, the hashrate increase is due to more efficient mining hardware coming online and/or miners with superior balances having a larger share of the hashpower network.” That is the basis for Glassnode’s takeover theory.”
On the other hand, as the price remains flat but the difficulty level increases, miners’ profitability is declining and approaching dangerous levels. The miners don’t seem to flash or turn off machines. Full speed seems to be the order of business…or is there another hidden factor wreaking havoc behind the scenes? Is there a secret force behind the big bitcoin hashrate increase in 2022?
BTC price chart for 10/18/2022 on Timex | Source: BTC/USD on TradingView.com
Rage Against The Machine
Rumors of a new and extremely powerful Bitmain ASIC abound. Depending on who you ask, Bitmain distributed it themselves, or they sent the machines to a powerful publicly traded mining company for them to test. In any case, the result is this extreme increase in bitcoin hashrate against all logic. However, these are just rumours. The company has not uttered a word about any new machine and there are no document leaks of any kind.
However, there is an extreme increase in bitcoin hashrate against all logic.
Featured Image by Harnoor dhaliwal on Unsplash | Charts by TradingView
