- Bitcoin mining hashrate has quadrupled over the past six months to hit a high of 200 million terahashes per second as price spiked towards the end of 2021.
- However, while it makes the network much more secure, it’s bad for the price and could be a key factor in what happens next to BTC.
Bitcoin mining is becoming bigger by the day, with the sector attracting more new entrants in the past six months than at any other time period. However, as experts reveal, this may not bode well for the price in the near future. As more miners flood the market, the BTC price could be heading lower.
Over the past year, the mining industry has gone full-circle. It started with China purging out all miners, claiming they were consuming too much energy and derailing its green energy goal. The miners moved to the U.S, Kazakhstan and Russia and despite a slight dip in hashrate, they were able to get their mining rigs running again.
In the second half of 2021, the price of BTC hit record highs, attracting more miners. Over that time, the hashrate shot up 400 percent to exceed 200 million terahashes per second.
Read More: Bitcoin hashrate hits new all-time high but BTC price still hovers at $42,000
As Satoshi designed it, Bitcoin self-adjusts its mining difficulty depending on the amount of mining power available. As such, the more the miners, the more difficult it is to mine. This means that miners have to employ more resources to get the block reward. When they do get the block reward, they are more likely to sell and cover their costs, as opposed to hodling as they have always done.
Justin d’Anethan, the institutional sales director at Amber Group, a Hong Kong-based crypto firm, explained:
Running costs are a major factor in miners’ decision to hold or sell newly acquired coins. They are the first and most natural sellers in the crypto space and so definitely impact prices.
Justin told Reuters that in recent months, miners have been transferring more coins to exchanges than they have been to their reserves, indicating they are more likely to sell than hodl.
Data from Arcane Research supports this. At the start of November, miners held $114 billion worth of BTC as the crypto marched on to a record high later that month. This figure has dropped by 34 percent to stand at $75 billion.
Joe Burnett, an analyst at Blockware Solutions, a mining firm, commented:
As more miners join the network, each individually earns fewer bitcoin. This is because network difficulty increases in order to slow the issuance of new bitcoin.
It doesn’t help that Bitcoin has been dipping over the past week. As CNF reported today, the crypto has failed in a test on whether it will prevail as a safe haven asset at the heart of the Ukraine-Russia border tensions.
Read More: Not a safe haven: Bitcoin sinks as Ukraine-Russia tensions mount and gold spikes
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