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- As a result of the low Bitcoin price, the Bitcoin mining profitability has fallen to an all-time low.
- Subsequently, the Bitcoin hash rate has dropped near a 3-month low, to 82.2 TH/s, due to the capitulation of numerous miners .
The hash rate of the Bitcoin network has also dropped sharply in the last few days due to the global coronavirus pandemic and the collapse of the Bitcoin price. While the hash rate reached an all-time high of 136.2 133 Tera-Hashes per second (TH/s) on March 1st, it fell yesterday close to a 3-month low to 82.2 TH/s. Thus, the hash rate currently also shows a slump of about 40 percent compared to the recent all-time high, as the data from Blockchain.com shows.
In general, Bitcoin’s hash rate is considered an indicator of the health of the network. It also reflects the support of the miners. Although historically, the hash rate has always been on the rise before the Bitcoin Halvings, this trend, which was also evident this time, came to an abrupt end. However, given the exceptional macroeconomic factors, this is not surprising.
The decline in the hash rate can clearly be explained by the price pressure on the miner. As Glassnode stated in a tweet, it is now unprofitable for many miners to continue their operations. Although Bitcoin mining is highly dependent on geographical location and local electricity costs, even miners who purchase electricity at low prices are affected.
Due to the declining $BTC price, it is now unprofitable for many miners to continue their operations.
Since its peak on March 7th, the 7DMA of #Bitcoin's hashrate has fallen by ~16% – with hashing power disappearing even faster after the drop to $5k.https://t.co/5bnFHpTXfX pic.twitter.com/X9uw8hOCgD
— glassnode (@glassnode) March 18, 2020
According to data from Bitinfocharts, Bitcoin Mining profitability has dropped to an all-time low of USD 0.0693 per day and per 1 TH/s. Numerous experts expect that many miners could be forced to capitulate if the current price persists or if the price of Bitcoin drops further. As CNF reported, the upcoming Halving in May could further intensify the situation.
Nevertheless, there is no reason to panic. Statements from other news portals that speak of a “dying Bitcoin network” are exaggerated and not true. As Andreas Antonopoulos noted, the Bitcoin network can safely continue to exist even with a tenth of the hash rate.
Effects on the Bitcoin price
However, the impact on the price is uncertain. On the one hand, there is a theory that Bitcoin miners, when prices fall, exert increased selling pressure on the Bitcoin price. This is due to the fact that they have to sell more of their produced Bitcoin (BTC) to cover their running costs. The increased selling pressure can have a negative impact on the BTC price.
On the other hand, there is also a theory that miners, after having to turn off their equipment, increasingly keep Bitcoin and speculate on a price increase, which somewhat alleviates the selling pressure. This strengthens the buying side, which in turn gives miners an incentive to HODL Bitcoin.
At the time of writing, the Bitcoin price has shown an upward trend of 6.8% over the last 24 hours. The next strong resistance is waiting for Bitcoin around the USD 6,000 mark.
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