is assessing something that is always interesting digging activity on BitcoinEspecially with the combination of price and the broader market.
After all, miners are the group that acquires those newly mined bitcoins as the blockchain continues to develop. Getting this revenue into the network’s core coin means that their actions can be symbolic.
However, something remarkable is happening right now. The hash rate, which means the amount of computational power being spent by the bitcoin network – that is, the number of miners – is increasing. And it’s growing a lot.
But at the same time, the price is falling.
We’re printing an all-time high in hash rate after an all-time high. However, the price declined over the past few months before trading near this $20,000 level.
that’s unusual. As the chart above shows, the last time we had a violent crash – May 2021 – the hash rate also fell. This is natural – again, the revenue from these miners is bitcoin, so why shouldn’t mining activity drop in response to a major price drop?
Instead, the hash rate – and the difficulty of the network – remains high. Most people say this is a good thing. And they are right – the higher the hash rate, the more secure the network. And the more secure the network, the healthier the bitcoin.
But does it make sense? Let’s look at it from an economic point of view. Are miners not selling as much as they should be? It seems like we are crabbing on the shore after this accident, the miners are not giving up. can point to you Ethereumswitch to Proof-of-Stake in September As for attracting more miners to bitcoin, but the dates don’t really line up.
Let’s see what miners are selling (Graph via Arcane Research).
After the summer dedication, they’re not really selling out. But could this change soon?
I recently written How do I believe we can be one event away from a bad red wick for bitcoin? Looking at the underlying mining data, I get even more nervous again. Again, this is far from certain – more hunch – but let’s look at the last time we had a rising hash rate with a falling price.
This happened in mid-2018… and it was no good.
Let’s zoom in a bit on this time frame – the chart above is a bit busy. Taking a peek into the 2018 window, we see how the same pumping value hash rate happened despite the price drop. And then see what happened to the price at the end of 2018.
So this is worrying. And some are pointing to it as a bearish indicator. But as anyone who follows my analysis knows, I’m not exactly comfortable extrapolating past bitcoin cycles to date.
Yes, it happened in 2018. But look at bitcoin at the time. Have you even heard about it? Because many people didn’t have it – it was still a distinctive asset, not yet making noise in the traditional world. Not to mention, the macro climate is completely different today, with us in a new interest rate paradigm. One point that should never be forgotten looking at past cycles: none of those cycles happened when we were in the middle of an economy-wide bear market.
But at the same time, it is not just the fact that this has happened before. To me, I’m a little surprised that the miners here aren’t selling a bit, or why the hash rate is increasing so aggressively.
So, in conclusion, this indicator is not causing me to run for the SELL button. But I like to use mining data with my extensive analysis, and this is a curious phenomenon. And as I wrote last week, I fear this crab movement could end with a red wick around $20,000. This is a psychologically important level, and once we push hard below it, there isn’t much resistance.
There are too many variables in the broader market that could easily go south, and bitcoin hasn’t given up much since the contagious wave of summer – stocks have really taken off. This underlying mining activity is not assuring those concerns, even if it is not increasing it.