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What Does it Mean for Bitcoin’s Price if the Hash Rate Hits a New High?

cryptoknowmics.com 05 October 2021 04:42, UTC
Reading time: ~2 m

As the hash rate of Bitcoin continues to grow, a new ATH might be on the horizon. Based on the prior pattern, here's what it may indicate for the price.

The Hash Rate of Bitcoin Is Increasing

The BTC hash rate has been improving in recent months after plummeting in June from its all-time high (ATH) value.

The Bitcoin "hash rate" is a metric that measures the overall processing power on the crypto network.

For achieving consensus, the BTC blockchain employs the proof-of-work (PoW) mechanism. In this technique, nodes (referred to as "miners" in this context) perform complicated mathematical equations, with the quickest one adding the next transaction. 

As a result, to join the network, these miners demand a lot of computational power.

This sort of consensus method aids in the decentralization of the Bitcoin network and the security of the blockchain.

When the hash rate rises, it indicates that more nodes are entering the network, and the network becomes more decentralized. As a result, such an increase contributes to the blockchain's security.

Lower hash rates, on the other hand, might be detrimental to the network since they may result in slower transactions owing to fewer nodes, as well as less security.

The indicator's value plummeted as a result of China's ban on crypto mining in the country.

Because the country housed a significant portion of the world’s hash rate, it is not surprising that such a fall occurred when miners were forced to leave the country.

What Does This Mean for the BTC Price?

The hash rate reached the current ATH, so did the price of BTC. This has happened in the past as well.

This might imply that if the hash rate reaches the new ATH, so will Bitcoin's price. Some believe that the link exists solely because when BTC reaches such peaks, mining becomes highly profitable, and therefore more people join in to earn a profit.

If the latter view is correct, the price may not be as tightly connected to the hash rate.

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