Bitcoin’s rapidly rising price hasn’t reached its hash rate – which is a bit unusual.
While the volume of transactions and network utilization rates remain incredibly high, the tera-hashes per second performed by the network have collapsed in the past few days.
Some believe this could be due to the end of the rainy season in parts of China, which contributed to ultra-cheap hydropower electricity.
To accommodate this sliding hash rate, the Bitcoin network has just experienced the second largest negative adjustment in mining difficulty ever seen.
This makes it very lucrative for west-based miners who can now mine blocks more easily due to the decreasing concentration of mining power in China.
This trend is viewed as fundamentally positive by many analysts, as the centralization of hash power in China has long been seen as a potential Achilles heel for the benchmark cryptocurrency.
Bitcoin hash rate will drop as dominance shifts from China
Bitcoin’s rapidly declining hash rate is likely due to China-based miners closing their drilling rigs due to an increase in electricity costs at the end of the rainy season.
It’s quite common for the hash rate to fluctuate a lot due to seasonal changes in China as the dry season adds to higher electricity prices due to the reduction in cheap hydropower.
Jameson Lopp spoke about it in a recent tweet, stating that the ongoing shift in hashing power from China is a positive development that is expected to continue over the next several years.
“Bitcoin hashrate has dropped ~ 45% in the last 3 days, presumably because Chinese miners relocated their equipment for the dry season. Hopefully, the semi-annual swings in hashrate will become less volatile in the years to come as China’s share of hashrate continues to decline. ”
The moving hash rate helps adjust the historical difficulty
Analytics platform Glassnode recently stated in a tweet that the recent drop in hash rate has led the Bitcoin network to its second-largest difficulty adjustment ever.
“We just saw the second largest negative adjustment in Bitcoin mining difficulty in history: -16%. It exceeded the -15.9% change in March of this year. The only other time problem was a major downward correction (-18%) over 9 years ago in October 2011. ”
Image Courtesy of Glassnode.
If hash power continues to shift from China to other countries in the coming years, it could help significantly improve underlying basic health.
Featured image from Unsplash.