Changes in Bitcoin Hash Rate through the Coronavirus Pandemic: Why It Is the Right Time to Invest In Bitcoin
That Bitcoin has weathered plenty of storms over its twelve years of existence is true.
None, perhaps, has been more dramatic than the Coronavirus fueled sell-off of March 12-13, 2020. The effect of this upheaval has had a noticeable impact on an all-important Bitcoin metric: the Bitcoin mining hash rate.
Hash rate, a complex phrase, right?
Well, let’s try to break it down in simple terms. Bitcoin needs miners to verify transactions on the network and prevent double-spend, that is, using the same coins to make two (or more) different transactions.
Each miner uses a powerful computer to try and verify and add a “block” of transactions to the existing Bitcoin blockchain.
Adding the next block is a very competitive process, whereby computers try to win the right to come up with a 64-digit hexadecimal number (a “hash”), less than or equal to the target hash. Many computers are trying to guess this hash at any given time.
Miners with a high hash rate on their equipment have a better chance in the competitive mining environment. The higher the Bitcoin hash rate, the more difficult it is to mine.
That, in a nutshell, is what hash rate entails.
Miners are crucial to the Bitcoin network. Every block after the genesis block has been the result of miners playing this fundamental role. For their efforts, earn block rewards in the form of Bitcoin, as well as transaction fees.
For the last four years, the block reward has been 12.5 BTC, but this was halved to 6.25 BTC on May 11, 2020. Halving is hard-coded in Bitcoin’s source code and does so every after 210,000 blocks or four years.
Bitcoin Hash Rate and Price Correlation
The price of Bitcoin has a drag influence on the Bitcoin hash rate. See, most miners are in this competitive business to make a profit. If the prices of Bitcoin crater, a considerable number of miners will simply run to the ground.
Low prices can’t simply justify equipment costs and high power bills for many.
Following this theory, the higher Bitcoin prices go, the more miners have an incentive to mine. However, in bear markets, it is logical for many to shut their mining rigs until prices look better. Right after the historic Bitcoin rally in late 2017, miners got into the game in record numbers.
What followed was a dramatic price slump through much of 2018, and mining activity eventually took a hit. The effect was not immediate, though, because a lot of miners kept mining, hoping for a price rebound at some point.
In recent times, the price of Bitcoin and the total hash rate have had some level of correlation. Starting back in November 2019, when reports of Coronavirus outbreak broke, Bitcoin prices stuttered around the $8,000 mark, almost 30 percent off mid-2019 highs of over $13,000.
The price went lower in early December 2019, reaching a low of 6, 622 on December 18, 2019, as per CoinMarketCap data. From then, prices went up gradually, reaching a high of $10,324 on February 12, 2020.
From this time, Coronavirus fears began manifesting in stock markets. For Bitcoin, the effect was really dramatic from March 9 and peaked on March 12. Investors sought to dump volatile assets, and Bitcoin was one of the casualties.
Needless to say, most assets and stocks suffered similar losses. Bitcoin suffered a 50 percent rout in just over 48 hours of trading to bottom out near the $4,000 mark.
Since then, Bitcoin prices have been on an impressive recovery trajectory. Given the fact that Bitcoin does not have stimulus packages and bailouts like other stocks in the economy, this period has been a testament to Bitcoin’s resilience as an asset.
How Has The Bitcoin Hash Rate Fared During This Period?
Through this period, the Bitcoin hash rate started in the 90 EH/s range. It fell to 86.9 Tera hashes/second then gradually went up again.
The Bitcoin hash rate peaked at 123 EH/s on March 8, 2020. Then came a drastic slump, which eventually bottomed out at 94. 15 EH/s on March 22, 2020.
This metric shows that the Bitcoin hash rate follows Bitcoin prices. As soon as the Bitcoin prices started falling, the Bitcoin hash rate took a toll. The price decline in March was so drastic; it immediately forced a lot of miners out of business.
Bitcoin Hash Rate Recovery
Since the drastic decline in Bitcoin hash rate in March, the hash rate has ticked back up again, after bottoming out at about 94 EH/S the hash rate had recovered to about 118 EH/s at press time. Bitcoin prices are now above the $9,650 mark after briefly rallying past $10,000 on June 1, 2020.
The trajectory reflects overall better market confidence in Bitcoin. Stock markets have received significant cushion in recent weeks after the US Congress passed a $2 trillion stimulus to prop up the US economy.
Bitcoin mining takes a toll in times of crisis. The coronavirus pandemic has been a painful period for many people in the finance sector. Trillions of dollars got wiped out from stock markets.
It is an early call, but the world seems to be through the worst of the Coronavirus Pandemic. Unfortunately, over one hundred thousand people have lost their lives globally, with over thirty thousand in the USA alone.
Flattening the Curve
That is a phrase that has been going around in news circles recently. Countries and cities have been attempting to get the Coronavirus death toll to flatten. The likes of Italy and Spain have leveled off this week with daily deaths reaching a plateau level.
The United States is pretty much at that stage, too, though much depends on discipline in enforcing quarantine measures to beat this virus once and for all.
As the virus death rate appears to flatten, leaders are already formulating plans to reopen economies. Donald Trump has been pretty insistent of getting the US economy back rolling, even though some have questioned whether this is a wise move.
Either way, there is some light at the end of the tunnel. The world seems poised to come out of the Coronavirus fears and return to normalcy.
Now Is the Best Time to Get Into Bitcoin
As Bitcoin prices gradually go up, this is probably the best time to invest in Bitcoin. The fact that Bitcoin is on the cusp of the much-anticipated halving period means that it is about to see price gains. Halving essentially means a reduction in supply.
Following the logic of demand and supply, a reduction in supply, with the same demand, means that Bitcoin prices will go up.
The Bitcoin community is heavily anticipating this halving event, and rightfully so. Bitcoin is filling a market position, not just as a currency, but also as a store of value.
Still, halving is not good music to Bitcoin miners but to holders, investors, and traders.
Purchase Bitcoin Mining Equipment from VBit Technologies
Investing in Bitcoin as an asset now is lucrative. Bitcoin seems to be on a road to recovery after the worst stretch in over a year.
As lucrative as speculating on Bitcoin prices can be, purchasing Bitcoin mining equipment and letting professionals manage it for you is the real deal. It will especially come in handy if the miner in question has the ability to weather the rollercoaster that is Bitcoin prices without flinching. VBit Technologies has low overhead costs as a hosting facility and even lower power costs as it operates from Colorado, United States. This means even if Bitcoin prices take a turn for the worse, miners can still operate profitably.
Besides, there is no substitute for this quality and the economies of scale VBit Technologies enjoy.
For the Bitcoin network to operate and stay as robust as it is, miners have to be profitable. Therefore, as Bitcoin prices recovers, a reliable host and equipment reseller is the best ally you could have. Notably, VBit Technologies has suspended its auto rebuy feature until further notice.
VBit Technologies is your best bet through thick and thin, especially now. The upheaval in Bitcoin prices take out “weak” Bitcoin miners. The fact that VBit Technologies relies on renewable energy to power miners means that it remains profitable throughout.
Even as the Bitcoin hash rate seems to be on a positive trajectory, it is best to rely on proven entities in this market. The future seems to be full of optimism. As Bitcoin emerges from the Coronavirus fears, this is the best time to cash in on a potential bull run.