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Experts: Bitcoin Hashrate Increase Shows Investors are Happy in Long-Term

Last Updated March 4, 2021 3:55 PM
Joseph Young
Last Updated March 4, 2021 3:55 PM

The hashrate of the Bitcoin network, which represents the amount of computing power securing the blockchain, has continued to increase despite the 70 percent decline of BTC since January of this year.

David Sapper, chief operating officer at Australia-based cryptocurrency exchange Blockbid, said in an interview with Bloomberg  that the continuous rise in the hashrate of Bitcoin demonstrates the satisfaction of investors in the long-term trend of the dominant cryptocurrency.

“The increased hash rate means people are here for the long-term because they’re happy to just accumulate what they have, potentially even run at a loss. At the same time, they do sometimes have to clear house and dump,” Sapper said.

Why is Hashrate Increasing?

In a bear market, mining cryptocurrencies can become less profitable as the same amount of energy, electricity, and resources are used to mine digital assets. For instance, if the mining difficulty remains identical but the price of BTC drops from $20,000 to $8,000, the miner can only sell the BTC it generates from its mining operation at a unit price of $8,000, where before, with the same cost, the miner was able to generate $20,000 per every bitcoin that is mined.

Naturally, as the bitcoin price fell, investors in the cryptocurrency market expected the difficulty of mining and the hashrate of the Bitcoin network to fall, proportional to the price trend of bitcoin.

However, the hashrate of the Bitcoin network has continued to increase at an exponential throughout the 2018 bear market, a period in which the valuation of the global crypto market fell over 78 percent.

Hashrate of the Bitcoin network, provided by Blockchain

Hence, Sapper, who operates one of the biggest cryptocurrency exchanges in Australia, suggested that the consistent increase in the hashrate of Bitcoin shows the patience of investors and their firm belief that bitcoin along with the rest of the cryptocurrency market will eventually recover to its previous levels in the mid to long-term.

Marco Streng, the CEO at Genesis Mining, offered a difference explanation to the phenomenon, stating that it merely demonstrates the rapid change and growth of the global mining industry, which with key players such as Bitmain and Samsung, have produced more efficient machines and mining equipment on a regular basis.

He emphasized that more efficient miners that operate highly sophisticated mining facilities are big enough to cover the drop-out of inefficient miners, that have no space and capital to compete against the behemoths of the industry.

“There are still major expansions happening, especially from more efficient miners. The expansion is so big that it compensated for the drop-out of not-so-efficient miners,” Streng explained.

Generally Optimistic

The analysis of both Streng and Sapper are optimistic in that they have suggested the increase in the hashrate of Bitcoin is either caused by the rapid expansion and growth of the Bitcoin mining sector or the expectations of investors in the cryptocurrency market that major digital assets will soon recover from their drops.

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