Bitcoin Network’s Difficulty Surges Close to An All-Time High With an 8.5% Positive Adjustment
Bitcoin price might be stagnant currently but the Bitcoin network is as strong as ever. The difficulty of the network has surged close to its all-time high with a record positive adjustment of 8.5%.
On the other hand, the hash rate of the network is also seeing growth. Last week, it climbed to nearly to ATH of 133.29 Th/s and is currently at 115 Th/s. The network hash rate is closely related to the profit margins of miners.
The hash rate increases as the number of resources dedicated to securing the network through mining activity rises. As these committed resources rise over time, mining costs and/or efficiency gains also rise.
— PlanB (@100trillionUSD) April 21, 2020
This means for miners to maintain healthy profit margins, a rising hash rate is needed to correspond with an increasing asset price.
The ongoing growth is also the result of new big professional US mining firms getting into the mining business and the new 7nm hardware, noted analyst PlanB.
However, while the deployment of the latest generation of ASIC mining rigs, the Antminer S19 series, and the Whatsminer M30S was announced earlier this year, they have yet to be widely distributed to miners.
In a discussion hosted by Bitcoin Magazine, Poolin VP Alejandro De La Torre noted that there were rumors that Chinese miners have been able to acquire these rigs but they haven’t as of yet.
“No one can get them out of Asia… No one in Europe or the US is able to get these new miners or if they can, it’s very expensive so they probably don’t,” he said.
After halving the estimated mining breakeven will be over $15,000 if the hash rate continues to rise which makes BTC at current prices highly unprofitable to miners.
Behaving Like a High Sentiment Beta Asset
While both the hash rate and difficulty continue to rise, the price of Bitcoin is still hovering at around $7,000. However, since the “Black Thursday” when Bitcoin’s price fell by nearly 50%, it has recovered more than 75%.
This violent sell-off was the result of the coronavirus pandemic and in line with the global stock market. As such, the digital asset has been showing a “strong vulnerability to swings in the equities market,” both during the uptrends and downtrends.
“This behavior is a classic definition of high sentiment beta assets. Specifically, when investors are bullish on stocks they tend to be overly bullish on Bitcoin and when the market sentiment turns towards bearish Bitcoin positions are rapidly liquidated,” said Jesus Rodriguez, CTO of IntoTheBlock.
Bitcoin behaving as a high sentiment beta asset makes sense for a nascent and highly speculative vehicle, he said.
During this time, median transaction fees measured in dollars for bitcoin shot up about five-fold. The violent sell-off had an immediate impact on transaction fees as traders rushed to move coins in and out of exchanges to add margin to positions of profit from arbitrage opportunities.
While the most immediate impact of Black Thursday has now faded away, a month after the event with volatility reducing and spreads tightening, “some of the longer-term consequences are only starting to become visible,” noted Coin Metrics.