Hash Rate and Bitcoin Price During Mining Events: Are They Related?
On Saturday Bitcoin (BTC) price dropped below $9,000 again, increasing the uncertainty surrounding future price estimates and reminding investors that the Coronavirus continues to bear upon markets across the world.
Cryptocurrency market daily functioning. Source: Coin360
Interestingly, Bitcoin'southward hash rate reached an all-fourth dimension high on March five - 157 quintillion hashes per second - according to the available information from Coin Dance. This increase has been the design since the start of this year.
Hash rate represents the computational ability that Bitcoin miners need to apply to confirm transactions on the blockchain. The increase in hash rate represents higher security in the network, a trend that has been consolidated in recent years, ultimately increasing conviction for potential investors in Bitcoin.
Hash Rate (quintillion hashes per second) from Jan. 2022 - Mar. 2022. Source: Bitinfocharts
The relationship between the hash rate and the time to come Bitcoin cost have been discussed as well as other events related to miners, such as the upcoming Bitcoin halving which volition see the BTC reward per block created past miners cut in half.
The next halving event, likely to occur on May xx, 2022, raises additional questions on the behavior of miners that twenty-four hours and the relationships with the toll for the foreseeable futurity amid the increasing hash rate trend.
What insight does the 2022 halving provide for 2022?
The last Bitcoin halving event occurred on July 9, 2022, when the digital asset'southward closing price dropped from $666.52 to $650.96 on the halving day, a negative return of 2.36%.
Bitcoin price concluded up losing 7.5% that month, however, from July until the terminate of 2022, the price gained more than 35% ending the year at $963.74 on December 31.
Bitcoin Price (in USD) during July 2022. Source: Coinmarketcap.com
At the same time, the hash rate increased on the halving twenty-four hour period to ane.5606 quintillion hashes per second from 1.4978 quintillion hashes per second on July 8, 2022. Miners' profitability per hash is naturally reduced since to obtain the same amount of BTC as earlier, miners volition have to spend at to the lowest degree twice the power input as before from that twenty-four hour period onward.
Hash Rate (quintillion hashes per second) during July 2022. Source: Bitinfocharts
Similar toll action and hash rate development during Bitcoin Cash fork
The Bitcoin Greenbacks (BCH) fork on August one, 2022, is another example of an event directly impacting miners. Every bit seen before in the 2022's halving consequence, Bitcoin'south return on that day was negative at -5.62%, with the price dropping from $two,875.34 on July 31 to $2,718.26 on the twenty-four hour period of the hard.
Bitcoin Price during July and Baronial 2022. Source: Coinmarketcap.com
Contrarily to 2022, during the month of the effect - in this case, August - saw a great positive return at 49.2%. The residue of the year saw Bitcoin reaching a record high price at over $20,000 which is 159% higher than from August until the end of the 2022.
When information technology comes to the hash rate, information technology increased from July 31 (6.30 quintillion hashes/second) to Aug. 1 (6.44 quintillion hashes/second) – this was the opposite beliefs to the last halving issue'southward hash rate evolution. All the same, until the end of the year, the positive growth trend for the hash rate connected.
Hash Rate (quintillion hashes per second) during July and Baronial 2022. Source: Bitinfocharts
Stiff correlation between Bitcoin cost and hash rate
Across the years, the correlation between the Bitcoin price and the hash rate has been very high, suggesting a relationship between the two variables. In 2022, these two variables were correlated at 86.two%, while in 2022 the relationship was fifty-fifty greater at 91.5% - the highest across from 2022-2020.
However, in 2022, a high opposite human relationship was observed between hash rate and Bitcoin cost at negative 66.2%, existence the only year with a negative correlation between these variables. Naturally, the positive human relationship was again shown in 2022 with a correlation of 59.5%.
Correlation betwixt Bitcoin price and its hash charge per unit
A correlation of 100% ways that the Bitcoin cost and hash charge per unit move completely in the aforementioned management, while -100% correlation ways they are inversely related. A correlation of 0% means that the variables are non related in any style.
Data shows a significant negative human relationship betwixt hash rate and returns
When employing regression models to determine the influence of hash charge per unit on Bitcoin'south price, one can observe conflicting non-significant results, meaning nosotros cannot achieve a conclusion nearly the behavior in private years with a slight exception in 2022.
During 2022, at that place was a very small significant negative human relationship between the hash rate and Bitcoin's price, meaning when the hash rate increased by ane%, Bitcoin'south price would reduce by 0.01%.
A minor positive during the last halving result calendar month
During July 2022, the month of the last halving result, at that place was a modest positive significant relationship between the hash rate and Bitcoin returns – when the hash rate increased by 1%, Bitcoin returns would increase past 0.018%, in the same line as the positive cumulative render during that month also every bit the hash rate increasing trend.
Outlook for the upcoming 2022 halving
Bitcoin will experience its side by side halving event in approximately 64 days and the block reward for miners will be cut in one-half from 12.5 BTC to 6.25 BTC. It is commonly assumed that miners tend to sell before the halving event due to the decrease in the rewards, which could hurt Bitcoin'due south price soon earlier the issue.
Every bit hash rates proceed reaching tape-highs and its relationship with halving events mimic the upward continuous tendency, investors may face a short-term price decrease only focusing on the previous medium to long-term horizons shows a recovery in the example of both mining-related events.
Information for the hash rate drawn from bitinfocharts.com. The views and opinions expressed here are solely those of the author and exercise non necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risk. Y'all should conduct your own enquiry when making a decision.
Source: https://cointelegraph.com/news/hash-rate-and-bitcoin-price-during-mining-events-are-they-related
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