Bitcoin’s hashrate hit a new all-time high of 331EH/s, according to data from Glassnode. Historically, there has been a loose correlation between hashrate and Bitcoin price debate over whether hashrate follows price or vice versa.
The hashrate spike comes at a tough time for miners as some struggle to repay debt Payments following Bitcoin’s 70% drawdown from $69,000. In addition, research conducted by CryptoSlate indicates that there may be other capitulation.
If the growing trend of increasing hashrate continues without further price increases, a second sellout could occur as miners sell their Bitcoin. A similar situation occurred in June when miners sold around 20,000 BTC.
The advantage of a constantly increasing hashrate is that the possibility of a 51% attack on the network decreases. With a hashrate of 313EH/s, an attacker would need around 1.9 million Antminer KA3 miners (166Th).
In 2018, it would have cost only $1.4 billion to conduct a 51% attack on bitcoin when the cost of mining 1BTC was only $8,000. Today, the hashrate has increased by 900%, and therefore the network is all the more secure. Even in 2018, a bad actor would have needed 2.4 million high-end ASIC miners to perform the attack.
However, although the increase in hashrate has made the network more secure, it also leads to higher costs for mining Bitcoin. A higher hashrate means higher network difficulty and, therefore, a reduction in BTC generated per kW of energy.
When the cost of mining Bitcoin exceeds the price, miners often face liquidity issues. The issues stem from a myriad of factors, including margin calls, cash flow, and other general operating costs. As a result, Binance Pool launched a $500 million fund to support “struggling mining assets”.
However, investment in Bitcoin mining shows few signs of slowing down. Several mining companies, such as CleanSpark, are looking for new investors as they bought 3.83 Argo miners. Riot inaugurated a new 1 GW mining facility, Great American Mining was acquired by Crusoe Energy and Compass Mining signed an agreement on a new 27 MW mining center.
New innovation in the mining space includes new liquid-cooled mining machines from Fabric Systems, a mining investment entity of Greyscale, and Block is launching a new mining unit acquiring the former CTO of Argo.
While the short-term picture may be worrying for Bitcoin miners, there is little evidence of long-term bearish sentiment.