Bitcoin Hashrate remains on its upward trajectory

Just days after the significant drop in the Bitcoin hash rate, several monitoring sources confirm that the hash rate shows signs of recovery. Data from monitoring source ‘Blockchain’ estimate that on 26 Sept hash rate reached a new all-time high of 108 quintillion hashes/sec.

This year, the hash rate in the Bitcoin network has increased more than 3 times from last years low. Last year continued drop in prices and at one point when mining became unprofitable, many miners closed their mining operation. The rise in the hash rate indicates the healthy growth of miners securing the Bitcoin network.

So what really happened with a sudden Bitcoin hash rate drop on 23rd Sept?

• Technical experts argue that the hash rate can not be measured. The charts available online are just estimates by using previous block intervals. If several slow blocks happen in a row, it makes these estimates disproportionate.

• In another explanation, a sudden drop in hash rate may also be due to a move by miners to upgrade the firmware or hardware specs ahead of Bitcoin’s network forthcoming difficulty increase.
  
  While comparing the hash rates in Feb-May with Jun-Sep 2019, the latter period has a significantly higher variation in the daily hash rate. One contributing factor to large fluctuations is the rising difficulty level. This forces miners to upgrade their mining hardware and firmware causing temporary halt.

How hash rate is related to the Bitcoin price?

As seen on 23rd Sept, a 30% drop in hash rate caused a large scale panic among speculators. What followed was a significant drop in Bitcoin price. A coincidence? Not really. By comparing the percentage change in hash rate with price for the last 3 months, we saw no evidence that there is a correlation between the two.

In fact in an earlier instance on 20th July, the Bitcoin network experienced an increase of 50% in hash rate. However, the price of Bitcoin on the following day closed 2% lower than the previous day.

So how they are related: The rising hash rate indicates rising competition between miners to commit a new block. To level the playing fields, the difficulty level is adjusted which forces miners to reevaluate their mining operations. As a result, miners upgrade their hardware specs and firmware to remain competitive.

It only becomes a problem when the mining operation is no longer profitable. When this happens, miners stop their operations making the network in control of fewer miners, thereby making the network vulnerable to security threats as seen this year with Ethereum Classic 51% attack.