After a brief period of decline, the hashrate of Bitcoin is now recovering as well.
According to the estimates of Hashrate Index, the seven-day moving average had fallen below 800 Eh/s last week, but as of Saturday, it rose back above this threshold.
The all-time high was reached at the beginning of February, at almost 850 Eh/s, and by the end of February, it had dropped to 750. Then in mid-March, it had risen to 840, but afterwards, it had fallen again below 800.
Essentially, it hasn’t risen significantly since mid-December, that is, since it surpassed 800 Eh/s for the first time in history.
The relationship between hashrate and the price of Bitcoin
As can be inferred from the previous data, there is a direct relationship between the hashrate of Bitcoin and the price of BTC.
However, unlike what is commonly believed, it is not the hashrate that influences the price, but the exact opposite.
After the electoral victory of Trump at the beginning of November, the price of Bitcoin started to rise from $70,000 to $100,000. This sudden rise increased the profitability of BTC mining, and thus the miners increased their computing power.
It is necessary to remember that mining is a competition in which those with greater computing power are favored, and the hashrate is precisely the parameter that measures the computing power engaged in mining.
And so from the beginning of November to mid-December, the seven-day moving average of the hashrate of Bitcoin mining rose from about 700 Eh/s to 800, only to stop there when the rise in the price of BTC also halted.
The holding of the hashrate level
What might surprise is the fact that the hashrate is still well above 800 Eh/s even after the price crash, although from this point of view in recent days there has been a rebound that has brought it well above $86,000.
It should be specified, however, that the reaction of the hashrate tends to be slow, also because the more it is reduced, the more there is a risk of earning less from this activity.
In other terms, miners are still always incentivized to keep the hashrate as high as possible, even when the price of BTC drops, and this is why price declines tend to have a very slow impact on the hashrate.
The earnings of the miners always occur in BTC, and the amount of BTC distributed overall to the miners remains the same for each cycle marked by the halving. Therefore, when the market value of BTC increases, the profits for the miners also effectively increase, and vice versa.
For example, while the price of BTC increased from $70,000 to $100,000, marking a +43%, the hashrate increased only from 700 to 800 Eh/s, with an increase of only 14%. This explains why the hashrate is holding even after the price drop, since it practically had not yet increased sufficiently before the price rise stopped.
The reduction of costs
When the hashrate increases, the overall costs of mining also tend to increase.
But the cost of the hashrate can sometimes also decrease thanks to an increase in efficiency.
The Hashprice Index measures the cost of hashrate, understood as the operating cost of 1 Ph/s.
One Petahash per second (Ph/s) is one thousandth of an Exahash per second (Eh/s), which is the unit of measurement used to express the estimated value of the overall hashrate.
A year ago, the average cost of a Ph/s was even higher than 100$, but in May of last year, it dropped to 44$.
Besides efficiency, two other key factors affect this cost: the cost of electricity, and the difficulty.
Electricity costs vary greatly around the world, and it is not strictly related to Bitcoin.
Instead, the difficulty is precisely the level of difficulty required to successfully extract the hash that confirms the blocks of Bitcoin.
From May 2024 to today, the difficulty has risen from just over 80T to over 110T, but despite this, the Hashprice Index has remained relatively stable around $50, with fluctuations from $40 to $60.
This means that efficiency has increased to the point of keeping the hashprice stable despite the increase in difficulty.
Among other things, at the end of January the hashprice was just over $60, while just before mid-March it had dropped to $44. However, now it has risen to about $49, which is perfectly average compared to the last ten months.
