The Bitcoin hash rate has dropped to one of its lowest levels, sparking a heated debate about how this dip and difficulty modifications will effect the price.
One expert even produced a chart that can predict the BTC price based on the hash rate, and the bull market is expected to expire in October, according to this chart.
Following massive crackdowns on BTC miners in China, Bitcoin’s hash rate has plummeted in recent days. At one point, the Asian country accounted for up to 75% of the worldwide Bitcoin hash power, making the crackdown all the more serious. Analysts have been crunching figures since then to see how the decline in hash rate and the resulting difficulty modifications have affected the price.
Any crypto fan knows that China has been cracking down on BTC miners at this point. However, the impact of the crackdown on cryptocurrency may not have been as obvious. It became evident last week just how bad things had gotten. The flagship cryptocurrency, as we previously reported, has had the largest difficulty adjustment in its 13-year history. The difficulty of mining bitcoin has dropped to its lowest point in history.
When the mining difficulty was lowered, it meant that mining Bitcoin required fewer resources. Some companies, like as Pennsylvania-based Stronghold Digital Mining, have stated that mining one bitcoin costs only $3,000, which is currently worth $34,365.
Of course, this environment will not persist indefinitely. According to Alex De Vries, the founder of Digiconomist and a BTC energy consumption specialist, this may not even last that long.
I expect this to be a one-time occurrence. These miners have moved on, and if you’re a miner, you’ll want to get those idle machines up and running as quickly as possible.
What effect will this have on the Bitcoin price?
So, while the miners have it easier, how will you do as a BTC holder through all of these hash rate and mining difficulty changes?
One investment manager and analyst says he has discovered a mathematical formula that demonstrates the association between hash rate and BTC price. Timothy Peterson of Cane Island Digital Research presented his formula, which he dubbed the “hash rate model,” on Twitter.
“The Bitcoin price to hash rate ratio can be used to spot past bubbles,” he said.
He went on to say that, based on the current trend in P(h) [hash rate], this bubble would burst by October 31. Any combination of a greater hash rate and a cheaper price is included in the ratio. As a result, the bubble is resolved by increasing the hash rate while maintaining a steady price.
It remains to be seen whether Peterson’s formula works. However, aside from the price, it’s apparent that the decrease in hash rate is accompanied by a decrease in other parameters. Active BTC addresses are one of them. According to Glassnode data, this figure was 916,000 on July 4th. While this is an improvement over the 855,000 reported on May 27, it is still well behind the 1.36 million recorded in mid-April.
ByteTree Asset Management’s chief investment officer, Charlie Morris, feels this might signal disaster. He stated that the drop in active user engagement is a symptom of low demand. For the time being, the hype cycle has ended, and the market is unable to attract new players at the same rate.
Hashrate of bitcoin/n
