Bitcoin Block Time Soars to Highest Level Since 2010 After Hash Rate Crashes to 2-Year Low
Bitcoin hash rate has taken a drop and is now down about 70% from its all-time high in mid-May. With this latest drop, the hash rate has fallen to a two-year low last seen in July 2019.
However, it’s just a short-term block-interval inferred hash rate, and the actual drop is about 47%.
Still, this drop resulted in an average block time of more than 23 minutes, up from the regular 10 minutes, to mine a single bitcoin block, “the largest daily mean block interval since the very early Bitcoin days,” in 2010, noted Glassnode.
Only 58 Bitcoin blocks were mined throughout Sunday, representing a drop of 60% from the baseline of 144 blocks per day.
This, of course, led to daily bitcoin miner revenue falling 80% from $70 million in May to about $12.8 million yesterday. Miners were earning the same level of revenue in early November when the price of bitcoin was around $13,000.
The chart to give you nightmares pic.twitter.com/339zUFn64j
— Charles Edwards (@caprioleio) June 28, 2021
The largest drop in hash rate is causing a significant decline in Bitcoin network activity, with the number of active addresses also falling off a cliff, reaching levels not seen since early 2019.
Even fee is extremely low, with average fees now 0.00021 BTC ($7.12), down from over $62 in late April, and able to keep stable during this whole ordeal.
As a result, the difficulty is expected to have a negative adjustment, which reached an all-time high on May 13 and has seen two downward adjustments since.
While one wants a quick difficulty adjustment after such a harsh drop in hash rate, the fact is when the hash rate drops a lot, blocks take longer to mine, so difficulty adjustment takes longer to come.
Adjustments are supposed to happen every 14 days, but the last adjustment was 16 days ago, and there are still 453 blocks to go. The difficulty adjustment is expected to be the largest downward ever, which should lower the block times.
Good news: the reduction  in Bitcoin mining hashrate from China is visible but survivable. There's a lot of mining capacity elsewhere.
— balajis.com (@balajis) June 28, 2021
This drop follows China’s crackdown on cryptocurrency mining. Such a big drop means China might have gone “almost entirely off grid already.” As we reported, Chinese miners are moving overseas, but this definitely provides a great opportunity for those with access to cheap energy.
Even JPMorgan strategies can feel the bullishness of it, saying, “the crackdown on mining operations in China should be considered as positive for bitcoin over the medium term as it accelerates a shift away from China’s high share in bitcoin’s hash rate, reducing concentration.”
While a real annoyance, 60-80% drop is “not fatal,” said Balaji S. Srinivasan, former Coinbase CTO, and General Partner at Andreessen Horowitz.
“In general, the global decentralization of Bitcoin mining shows a way to robustify against the famous Thanksgiving Turkey Chart. Even the Chinese state going after mining (not really a surprise) is only causing a temporary rise in block times. So far, pretty antifragile!”