Since last year the bitcoin hash rate — the amount of computing power used by bitcoin’s network of computers to create new coins — has soared as it rushes to catch up with the bitcoin price.
The sudden rise in the bitcoin price, which climbed from around $1,000 at the beginning of last year to almost $20,000 by December, led to a huge influx of new miners adding their computing power to the bitcoin network.
Despite Bitcoin’s 2018 price slump, the principal cryptocurrency’s hash rate continues to surge at an astonishing pace. Although the value of Bitcoin has decreased by 53% since January 1st, 2018, the hash rate has increased 155% in the same time period.
The continued growth in hash power expresses a strong, continued belief in Bitcoin by miners worldwide and may foreshadow a hidden bullish trend.
By the end of this year bitcoin will hit $25,000, more than 270 percent above current levels, according to Fundstrat Global Advisors head of research Thomas Lee.
Lee is basing his prediction on bitcoin’s historical trading price of 2.5 times its mining cost, which Lee expects to reach $9,000 by the end of the year.
Others have guided to bitcoin’s functionality for their faith in the cryptocurrency.
“If you want to own the asset that you can actually use today and that people are functionally using, it’s bitcoin,” Bart Smith, head of digital asset at trading giant Susquehanna International Group, told CNBC.
Hash Rate Explained
In simple terms, mining is the process of running complex calculations in search of a specific number. In a race to find the number first, mining hardware is used to run through as many calculations possible to secure the block reward, currently at 12.5 BTC per block.
Each calculation attempt to solve the computation is known as a “hash” and the “hash rate” is computed in hashes per second(h/s).
ASICs (application specific integrated circuits) have become the sole mining hardware used to mine Bitcoin due to their increased hash rate ability and higher energy efficiency. One ASIC has a mining power of approximately 12 tera-hashes per second. For comparison, in 2013, the total hash rate of the Bitcoin network on April 29, 2013, was 79.02 Th/s. Now currently is roaming around 38 Etahash/s which is 38,000,000,000,000,000,000 h/s or 38 billion trillion hashes per second.
Halving, miners race for accumulation.
Another possibility explaining the increase in hash rate could be upcoming Bitcoin “halvening,” estimated to occur around May 25, 2020. With the reward set to decrease from 12.5 BTC per block to 6.25 per block, miners may be trying to accumulate as much Bitcoin possible, before difficulty further increases and rewards decrease. The price of BTC at the time of the last two halvenings were $660 and $12 in 2016 and 2012, respectively.
Overall, it is a confident sign that miners continue to prove their support for Bitcoin through the increasing growth of hash rate. Instead of fleeing Bitcoin to mine other cryptocurrencies, they persist and strengthen the Bitcoin network.
It will certainly be interesting to see if the conviction of miners is ultimately worthwhile and Bitcoin makes the run that bulls anxiously await.