The cryptocurrency market is nothing if not unpredictable. For many investors, the wild and rapid swings in the value of individual coins are a big part of what they find so enthralling. However, the last week has seen the value of Bitcoin slump in quite a spectacular fashion. The interplay between Bitcoin’s value and the economics of mining are complex, but the more miners there are on the network, the more difficult it is to mine. The total power of all the miners on the network is measured by the overall hash rate.
Bitcoin’s Hash Rate Is In Decline Following BTC Price Crash
As the value of Bitcoin drops, mining operations that are no longer economical will shut down. With the value of Bitcoin dropping by almost 30% in just a week, the total hash rate has dropped to its lowest point since August.
BRUTAL: this is what’s happening now in a China based mining site …. 😨😨 pic.twitter.com/gcN4lVTyBt
— Dovey Wan 🦖 (@DoveyWan) November 20, 2018
While Bitcoin’s total hash rate is still much greater than it was at the beginning of the year, it still appears to be in a state of free-fall. Estimates for the cost of mining a single Bitcoin range from $6,000 to $7,000, depending on a variety of factors, most significantly the cost of electricity at the mining site. Now that the price of a Bitcoin has dropped to $4,500, many miners are operating at a loss, hence the recent exodus.
The larger mining operations have contingency measures in place to protect them from these market slumps. But smaller operations and individual miners may well find themselves priced out of the market.
Bitcoin hashrate is now the lowest it's been since August. It's still up sharply since the start of the year but it seems clear that some miners are shutting down their rigs in face of lower BTC prices. pic.twitter.com/Og9AJM6FGt
— Mati Greenspan (@MatiGreenspan) November 20, 2018
However, a number of those who have abandoned Bitcoin have simply repurposed their mining rigs, directing them to mining Bitcoin Cash instead. For example, BTC.top is a large mining firm who have announced their intention to begin mining Bitcoin Cash.
With no end to Bitcoin’s declining hash rate in sight, the long-term effects, if any, remain to be seen.