Bitcoin Hashrate May Rise Again With Decreasing Mining Difficulty To Come
Bitcoin saw its hashrate drop by more than 43.47% in a 3-day period, due to the closure of Chinese mining farms for the dry season. The reason is that they cannot generate enough hydroelectric power without rain, along with an increase in electricity costs.
Bitcoin hashrate has dropped by ~ 45% over past 3 days, presumably due to Chinese miners relocating equipment for the dry season.
Hopefully in coming years the semi-annual hashrate fluctuations will decrease in volatility as China’s share of hashrate continues to drop. pic.twitter.com/eBElCCniJU
– Jameson Lopp (@lopp) October 27, 2020
“Bitcoin’s hashrate has dropped about 45% in the last 3 days, presumably due to Chinese miners relocating equipment for the dry season.
Hopefully, in the coming years, half-yearly fluctuations in the hashrate will decrease in volatility, as China’s share in the hashrate continues to fall. ”
It is estimated that 10% of Chinese mining operations take place in Sichuan province. On October 25, many Chinese Bitcoin miners had their electricity prices significantly increased, which appears to be the main cause of the current drop in the hashrate.
While Chinese mining farms move to other locations in the country at a lower operating cost, this “temporary” slowdown that caused a nearly 45% drop in hashrate emphasizes the amount of dominance that China has in Bitcoin mining.
Source: Cambridge Bitcoin Electricity Consumption Index
As a result of this mining slowdown, Bitcoin transactions have taken longer to be processed in the past few days.
At the moment, the hashrate is up to 103 EH / S from 90 EH / S and is expected to increase after the difficulty adjustment programmed in 4 days.
Some speculated that, in addition to the general narrative of suspension of operations due to the end of the rainy season, there are two possible reasons for such a fall.
One is that miners can intentionally retain energy and operations, anticipating a more economical model and with less difficulty. The next difficulty adjustment is due in four days and the difficulty is expected to decrease by 10.56%.
While miners can take advantage of this reduced difficulty and increase their operational efficiency in this regard, there is another school of thought about why mining activity has declined.
Jameson Lopp stated on Twitter: “I don’t subscribe to theories that the hashrate affects the price. It’s the opposite.”
The current price of Bitcoin could lead Chinese miners to sell their existing Bitcoin at this level, no longer mining for now, given the current price of Bitcoin, which is being traded above $ 13,144 at the time of writing.