On-chain data shows the 7-day average value of the Bitcoin Hashrate has crashed by more than 9% since its all-time high (ATH).
Bitcoin Hashrate Has Seen A Sharp Drop Recently
The Bitcoin Hashrate refers to a metric that keeps track of the total amount of computing power that the miners as a whole have connected to the blockchain. The indicator is measured in terms of hashes per second (H/s) or the larger and more practical exahashes per second (EH/s).
When the value of the Hashrate rises, it means new miners are joining the network and/or old ones are expanding their facilities. Such a trend implies the network is looking profitable to these chain validators.
On the other hand, the metric going down suggests some miners have decided to unplug their machines from the chain, potentially because they are no longer able to break even.
Now, here is a chart from Blockchain.com that shows the trend in the 7-day average value of the Bitcoin Hashrate over the past year:
The value of the metric seems to have sharply been going down in recent days | Source: Blockchain.com
As displayed in the above graph, the 7-day average Bitcoin Hashrate set a new ATH of 942.6 EH/s back at the start of the month. Since then, however, the indicator has faced a steep drop and its value is almost back at the low from mid-May.
This trend is likely to at least in part be a result of the ATH in the Difficulty. The “Difficulty” is a metric coded into the BTC blockchain that controls how hard the miners would find it to mine blocks.
This indicator automatically changes in value about every two weeks and how it will change is dependent on the activity of the miners themselves. Satoshi wrote in a simple rule for the network to follow: the block time must remain constant at 10 minutes.
Whenever the miners take longer than this period to mine blocks on average, the chain reduces its Difficulty in the next adjustment to help get miners back up to speed. Similarly, them being faster forces the network to make mining harder.
The Hashrate increase earlier meant that the miners became too fast at their task (thanks to the additional power), so the chain responded by taking the Difficulty to a record value.
Below is a chart from CoinWarz that shows how the metric’s value has changed in the past few months.
Looks like the Difficulty has risen during the last two adjustments | Source: CoinWarz
The Difficulty increase to the ATH may have priced out miners who were already on the edge, hence why the Hashrate observed a plummet. Another contributing factor could be the price action. Although the price has rebounded now, it very much showed a bearish trajectory last week.
Generally, sharp declines in the metric indicate a worsening of sentiment among the miners. It still remains to be seen, however, whether this latest decline reflects a real shift. The Hashrate has shown this pattern of an ATH followed by a rapid decrease a couple of times already in the last two months.
BTC Price
Bitcoin has managed to recover beyond the $108,500 mark following a daily jump of 2%.
The trend in the BTC price over the last five days | Source: BTCUSDT on TradingView
Featured image from Dall-E, CoinWarz.com, Blockchain.com, chart from TradingView.com
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