The bitcoin hashrate, that is, the computational power that the network has to process transactions, has gone down too. The bear market affects the mining capabilities of a lot of small and medium startups. Without having resources to keep their mining operations on, they have opted to stop mining until there is a profitable price once again.
Bitcoin Hashrate Down
Bitcoin hashrate, one of the most important numbers related to the bitcoin network, has gone down. This is a natural result of the bear market and shows that bitcoin price is too low. At least, too low for miners to even reach break-even prices. This is evident when reviewing the evolution of hashrate though bitcoin history.
The graphic shows that the bitcoin hashrate has gone up dramatically this year. But, while bitcoin hashrate has gone up exponentially, prices have not accompanied it. Bitcoin hashrate is now six times higher the quantity that it was at January. But Bitcoin prices have gone down by 70% since the cryptocurrency price hike in last December.
This only means one thing: Miners are confident that bitcoin price will go up regardless of the condition. Also, this amount of hashrate is very good for the whole network, making transactions go faster; but it has its downsides also. The mining difficulty adjusts and it makes mining rewards go down.
Why Is Bitcoin Hashrate Important?
Bitcoin hashrate is the amount of computational power that the network has to process transactions. So, bitcoin hashrate is important because it determines how efficient is the network in its operation. If hashrate is plenty, it means that transactions will happen faster and the mempool (transactions waiting to be confirmed) will be always empty.
If hashrate is reduced and miners flee, network operativity can be compromised if a lot of transactions happen at one time and the network cannot cope with the load. This kind of already happened last December when miners only chose to process transactions with a high fee.
The network is already going that way. If hashrate keeps going down as a result of rewards not being sufficient enough to justify mining operations, the network will become congested. It is unclear when this would happen, or if it will happen at all, but if bitcoin price keeps going down (as many cryptocurrency experts are predicting), more miners will turn off their equipment to wait for better times. But with this bear market, it could take time.