What Death Spiral? Bitcoin’s Hashrate is Still Climbing

January 17, 2019 19:21 UTC

Following a period of sustained bearish sentiment in the Bitcoin mining market accompanied by three notable hashrate reductions in the final third of 2018, the flagship cryptocurrency’s network appears to be back on its way to optimum health.

Bitcoin Reverses Hashrate Decline

In December, CCN reported that the flagship Bitcoin blockchain’s hashrate dropped by 7 percent over a single 24-hour period as miners turned off their rigs or exited the market altogether after being forced out by low prices and nonexistent margins. Some crypto bears even predicted that Bitcoin had entered a “death spiral.”

Now, however, Bitcoin’s difficulty target has been revised upward and is closer to where it was in early December, which indicates that miners are beginning to come back into the market. Data from Blockchain.com and DRIVE Insider shows that the network’s hashrate has gone up to 40,219,475,700 GH/s, which is close to where it was in early December. The news comes as a boost for Bitcoin holders who have resisted pressure to sell in the face of testing the $3,000 support level for much of December before eventually bouncing back up to around $3,600 currently.

Source: Blockchain.com

Significance of Difficulty Adjustment

The difficulty adjustment mechanism exists to ensure that regardless of price movements, the Bitcoin network will always have adequate capacity to carry out transaction hashing using a dynamic system that eases difficulty when miner numbers go down and vice versa. As such, increased difficulty generally means that more miners are coming into the fray, which indicates that the crypto winter may be experiencing a mild thaw, at least in the mining space.

It is also key to remember that despite the much-publicised woes of the Bitcoin price in 2018, the network’s current hashrate is roughly three times more than at the same point in January 2018, with a difficulty approximately 2.5 times that of 12 months ago when it was coming off an all-time high. If Bitcoin is able to maintain its current price trajectory, 2019 might well turn out to be an interesting year for miners.

This is particularly so because after a disappointing year for many altcoins touted as “Bitcoin killers,” attention is once again turning to Bitcoin as the lodestar cryptocurrency which refuses to die, with developers looking to build on it rather than other networks.

Right now, it is still too early to say  with any certainty that Bitcoin miners are coming back into the market in significant numbers because there is a slight lag between miner numbers and difficulty adjustments. Over the course of Q1, the difficulty target will present a fuller picture of the state of the mining space.

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Last modified: January 17, 2019 17:39 UTC

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@DavidHundeyin

I am a busy Nigerian writer, journalist and writer with an interest in tech and finance. When I'm not contributing to CCN and traveling around Africa, you can catch me contributing to CNN Africa, or in the writers room at 'The Other News', Nigeria's weekly answer to 'The Daily Show' with nearly 2 million viewers. My work on 'The Other News' was featured in the New Yorker Magazine, and that was then cited in the Washington Post so I'm not sure that counts as a feature but I'll definitely mention it too! I have been nominated by the US State Department to take part in the 2019 Edward R. Murrow Program for journalists under the International Visitors Leadership Program. I also like hamsters. You can reach me on Twitter at _David_Hundeyin