Bitcoin’s growth, adoption, strength and evolution as an asset, a technology, and a currency has taken a few interesting paths that differ, but are intrinsically linked. Bitcoin’s market, in terms of its price, is very different from the growth of blockchain technology and even the mining side of things.
However, the mining hash rate of Bitcoin has long been associated with a strong blockchain and a good market. If there is good interest in mining the blockchain it has often come with a good performance from the price of the coin.
The link between hash rate and the price of Bitcoin was displayed when the hash rate spiked to impressive highs when Bitocin reaches its all-time high of $20,000 in December of 2017; at the same time the price of the coin plummeted to $3,000 and the hash rate fell.
Now, however, the hash rate of Bitcoin has hit a fresh all-time high at the start of 2020 – more than 8x that of what is reached at the end of 2017 – so should we take head and interest in this?
Hash Rate fundamentals
To understand the hash rate a bit better it is important to note that it relates to how much mining is going into the blockchain, and thus, how secure the network is. The higher the hash rate means the more miners there are to open new blocks, add more coins, and approve transactions while keeping the network distributed.
Now, on face value, this has nothing to do with the market for the price of Bitcoin, but in terms of the fundamentals, it should. If a network like Bitcoin is steadily growing and attracting higher mining efforts and interest, there are signs that the demand for the coin and the power of the network is high.
With that being said, it does not necessitate that the price has to follow a healthy network, in more recent times, it is external factors that have driven the price of Bitcoin.
Looking outside the box.
In 2019, the hash rate of Bitcoin was steadily climbing, this should add to the fundamentals of the market, but it did not. In fact, it was explained to The Daily Chain by Alejandro De La Torre, the Vice President of Poolin, one of the largest mining pools in the world, that mining hardware could be the reason.
So, the movement of the coin’s price in 2019 was much more related to things like CME, Baakt, and even the news from China that they were doubling down on blockchain. These instances proved more potent when moving the price of Bitcoin than the actual performance of the network.
While it is pleasing to see the network healthy and reaching new highs, it probably has a lot more to do with the mining hardware and a big of greed before the reward is cut in half in five months time.