Bitcoin (BTC) set a new all-time high for the hash rate last week, but opinions are divided on whether the growth trend can continue.
In a debate on Twitter on March 21, Preston Pysh, host of The Investor’s Podcast, observed a change in behavior in the metrics of Bitcoin’s hashtags in search of signs of a “lull” of the new hash rate.
Questions about the “calm” in the hash rate after a record high
Bitcoin has overcome significant odds over the past year to see the processing power dedicated to mining – the hash rate – reach a giant 222 exahash per second (EH / s) this month, according to estimates from the monitoring resource MiningPoolStats.
First, China caused a mass exodus of miners, and then this year’s attack on mining centers in Kazakhstan put the cat among the pigeons in terms of miners’ work.
However, a full recovery ensued on both occasions, reinforcing the idea that as long as there is at least one “friendly” jurisdiction for miners, mining will return harder than ever before.
Hash tapes use two simple moving averages (SMA) scatter rates to assess miner health and are used to conclude when price bottoms are likely to be close based on that health.
Miners have a breakthrough cost to produce each Bitcoin, and when the spot price is lower than that price, there is a danger that they will start “capitulating,” or stop working due to a lack of profitability. This has the effect of reducing prices, and it is necessary to adjust the difficulties in the Bitcoin network in order to massively reduce the cost of production of miners.
As for the hash ribbon, when the 30-day SMA goes below the 60-day SMA, this suggests that a capitulation event has occurred – at least large enough to measure.
“A simple one- and two-month simple moving average of the bitcoin hash rate can be used to recognize the bottom of the market, the capitulation of miners and – better yet – great moments to buy Bitcoin,” said Charles Edwards, CEO of Capriole’s asset manager. metrics, explained in a blog post in 2019.
“When the 1-month SMA Hash Rate crosses with the 2-month SMA Hash Rate, the miners’ worst capitulation is usually over and the recovery has begun.”
This time, the events in Kazakhstan could have been the trigger for the capitulation event, which, however, has already been erased in terms of the growth rate of dispersion.
“Margins are still very healthy. Production costs were low until the mid-1930s. Electric (operating) costs are low for 20s, ”said Edwards Pyshu, referring to Blockware analyst Joe Burnett’s theory.
“I think (Burnett’s) thinking about Kazakhstan is the most logical. So maybe a little capitulation (subject to wider macro / market power). ”
Bitcoin hash bar versus BTC / USD chart. Source: Glassnode
Difficulties set for record values
It’s not just about the hash rate: mining difficulties are also enjoying a winning streak that appears to continue this month after its own brief consolidation.
Related: Bitcoin could ‘easily see $ 30,000’ in shares due to 30% withdrawal in 2022 – analyst
As the most important of the basic indicators of Bitcoin, the difficulty will increase by an estimated 4.66% in the next automated adjustment in eight days.
The last two adjustments have been negative, but only, which means that the upcoming increase will lead difficulties to new all-time highs of 28.73 trillion.