Bitcoin Nodes Drop 10% Amidst the 25% Price Surge
- Bitcoin price and nodes have either no or negative correlation
- Investors, long-term HODLers should pay attention to the number of nodes to ensure bitcoin’s core value as an asset
In its latest report, DataLight, a cryptocurrency analysis platform talks about Bitcoin nodes and if they have any correlation with bitcoin price.
The article titled “Bitcoin Nodes and the Bitcoin Price: Studying the Health of the Bitcoin Blockchain” shares how since the crypto bull run in November 2017, the number of Bitcoin nodes has remained below 10,000 marks. While this period saw BTC hitting ATH at $20,000, the number of nodes though grew, by no means, they were in tandem with the price.
By April 2018, the number of nodes settled back towards the 10,000 marks again and remained steady throughout the crypto winter.
Bitcoin nodes are responsible for maintaining the integrity and security of the blockchain. An essential part of the Bitcoin network, nodes store a record of the transactions and run the software ensuring the network confirms to Bitcoin’s consensus rules.
In 2019, April first saw a substantial rally that took Bitcoin from just about $4,000 to above $5,000. However, during the period, the number of nodes dropped by 10 percent. This lack of correlation or the negative one in 2019, DataLight says could be the fundamental difference in the type of user who runs a node and those interested in price and speculation.
Sufficient Decentralization is Key to the Health of the Network
Unlike the Bitcoin mining nodes, there's no bitcoin reward for running just a full node rather it just uses up storage space, computing power, and energy. However, motivation lies elsewhere.
As DataLight points out, running a full node is the way to personally ensure the rules are being enforced as a full node can reject blocks that don’t follow rules. By facilitating transactions, it keeps a tab on the health of the Bitcoin blockchain that in turn influences the price.
And even more, substantial reasons are security and decentralization. Relying on a Bitcoin wallet without using a full node means you are placing trust in the hands of the wallet providers but the more independent the node, the greater the degree of decentralization and security – the most important part of Bitcoin – you have.
Hence, it is not surprising that bitcoin enthusiasts and true believers are the ones that care most about running a node, that requires time, resources, and some degree of effort.
The fact that Bitcoin price, so far, is largely moved by speculation and trader interest, these market participants don’t have interest in running nodes, hence the lack of correlation between the price of BTC and the number of nodes.
“Investors (…) particularly those HODLing for the long-term, should pay attention to the number of nodes and the health of the bitcoin blockchain.”
It is equally important for investors to be informed of this because if the number of nodes decreases, the Bitcoin network runs the risk of becoming increasingly centralized in the hands of fewer large actors.
“Sufficient decentralization is key to the health of the network – as it underpins bitcoin’s core value as an asset.”