mining in great shape despite the price drop

When the price of Bitcoin drops, companies engaged in BTC mining generally begin to experience some difficulties. 

At this moment, that does not seem to be happening. 

Actually, the hashrate is rising. How can this be explained? 

The hashrate of Bitcoin mining

According to the estimates by CoinWarz, updated almost in real-time, in the last seven days the overall hashrate allocated globally for Bitcoin mining has risen from 1.03 Zh/s to the current 1.29. 

In the same period, the price of Bitcoin fell from $121,000 to less than $105,000. 

In theory, a reduction in the value of the BTC market should reduce the miners’ revenues, since they earn solely in BTC and then partially sell them on the market to pay for the purchase of electricity. 

So it turns out to be quite strange this dynamic where the hashrate rises while the price falls. 

This discussion is actually much more complicated, because the two trends (hashrate and price) tend to be correlated only in the medium term, or at most in the medium-short term, but not in the short term. 

Medium-term Outlook

Taking the seven-day moving averages of Hashrate Index estimates, it is noted that in the last twelve months the growth of the Bitcoin mining hashrate only halted between the second half of June and the beginning of August. 

Analyzing the price trend instead, the decline occurred from February to April, that is, four months earlier. 

Instead, the previous slowdown in hashrate growth occurred between April and June of last year, which was more or less in conjunction with the price decline. 

The fact is that starting from November 2024, the market value of BTC has grown so much that the hashrate has not been able to keep up with it. 

The Slowness of the Hashrate

To increase the hashrate, it is necessary to purchase, install, and configure new machines. 

First of all, delivery does not always occur shortly after purchase, because it often takes quite some time before the new machines are actually available for delivery. 

Additionally, it is necessary to secure funding to purchase such machines, which have a considerable cost and need to be bought in hundreds, if not thousands, to significantly increase. 

For example, to increase the Bitcoin mining hashrate by 0.1 Zh/s, as many as four million Antminer S21 Pro at 234 Th/s are required. 

It is therefore easily understandable how slow the growth of the hashrate can be if the price of Bitcoin rises rapidly. 

The stability of the hashrate

This also explains why the hashrate is not decreasing at this moment. 

In fact, the growth of the hashrate this year only resumed at the beginning of August, that is, after the price of BTC had risen from $107,000 to $120,000, and it lasted until last month. 

At the end of September, when the price of Bitcoin had fallen below $110,000, the growth of the hashrate stopped, with a decline ending on October 4th. At that point, the price of BTC had started to rise again, reaching a peak on October 6th above $126,000. 

Starting from the very next day, a correction began, which accelerated on October 10th, and until yesterday had settled above $110,000. 

The subsequent decline is still too recent to have already impacted the hashrate. However, if the market value of BTC were to remain below $110,000 for a while, one could expect a reaction in the hashrate similar to that at the end of September, when it took two days to see it. 

The Impact on Bitcoin (BTC) Price

It is often said that changes in Bitcoin’s hashrate impact the price of BTC. 

This is actually not true, because as we have just seen, the real dynamic is exactly the opposite: it is the changes in the market value of BTC that impact the hashrate, 

Therefore, it is not even possible to use hashrate trend analysis to make price predictions, except in certain cases.

In fact, if miners were forced to sell large quantities of BTC at a low price because they needed to quickly convert to fiat currency to pay for electricity, the selling pressure would increase, even significantly. 

It must be said, however, that the selling pressure during this period is actually decreasing, and it has been since at least October 12th. This means that miners have not yet started to sell their BTC reserves en masse to finance the purchase of electricity.