What Is Fueling The Dramatic Rise In Bitcoin Hashrate?
Never mind the price, bitcoin’s hashrate keeps growing and growing. What does the phenomenon mean and why is it happening? Do miners know something we don’t? Or is something else going on behind the scenes? Those are the questions of the day in bitcoin and crypto circles. Our friends at Arcane Research recently took a crack at them in their The Weekly Update report, and we’re here to analyze the case AR presented.
“Another all-time high for the Bitcoin hashrate last week, touching a 7-day average of 267 EH/s. The largest difficult adjustment since May 2021 did not scare miners, with more machines coming online.”
After the adjustment, the bitcoin network resumed the rate of “6 blocks per hour – showing the power of these difficulty adjustments.” New machines came online, the system reacted, the hashrate adjusted, the fees went up, and bitcoin is back to normal although with enhanced security. A beautiful ecosystem that works effortlessly, regardless of what’s happening around it.
About the fees, The Weekly update explains how they relate to the hashrate:
“As a result of fewer produced blocks, the competition for getting transactions included has increased again, resulting in more fees generated for miners – up more than 25% over the past week.”
Ok, we established what happened. The question now is, why did it happen?
Possible Causes For The Rise In Hashrate
There are several theories floating around. Arcane Research has a rather conservative perspective on the matter, which is probably a safe position to take. Information is scarce and there’s an eerie air around the whole situation. According to The Weekly Update, “the Bitcoin hashrate is forming a 2022 top at these highs.” Arcane Research recently published a report on bitcoin hashratein which they conclude:
“The hashrate growth is likely caused by American miners returning to full production after a summer of periodically curtailing operations as part of their participation in demand response programs.
Some factors indicate that the hashrate will keep growing 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 year-end.”
In a recent NewsBTC article, our sister site featured a Glassnode report that theorizes, “a new dynamic as more of the hashpower is held by better capitalised publicly traded mining companies.” According to their analysis, enormous bitcoin miners came to take everything over and eat everyone’s lunch. The recent hashrate rise is just a symptom of that.
“According to Glassnode, since bitcoin’s price is still flatlining, the “hashrate rise is due to more efficient mining hardware coming online and/or miners with superior balance sheets having a larger share of the hashpower network.” That’s the base of Glassnode’s takeover theory.”
On the other hand, as price stays flat but difficulty rises, miners’ profitability is trending down and approaching dangerous levels. The miners don’t seem to be either blinking or turning machines off. Full speed ahead 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 great bitcoin hashrate rise of 2022?
BTC price chart for 10/18/2022 on Timex | Source: BTC/USD on TradingView.com
Rage Against The Machine
Rumors about a new and extremely powerful Bitmain ASIC abound. Depends on who you ask, Bitmain themselves deployed it or they sent the machines to a powerful publicly traded mining company for them to test. In any case, the result is this against-all-logic extreme rise in bitcoin hashrate. These are just rumors, however. The company has not uttered a word about any new machine and there are no document leaks of any kind.
There’s an against-all-logic extreme rise in bitcoin hashrate, though.
Featured Image by Harnoor dhaliwal on Unsplash | Charts by TradingView