What contributes to the bullish sentiment of Bitcoin miners?
Bitcoin’s hash rate has skyrocketed to 102 quintillion hashes for the first time in history, recovering from its low (31 EH/s) in December 2018. For those who have no clue, hash rate is the general measure of the processing power of the Bitcoin network. It is the speed at which a mining machine complete an operation in the Bitcoin code.
The Power of Hash Rate
During the mining process, blocks of verified transaction information have to be ‘hashed’ before they could be added to the ever-growing blockchain. To hash transactions, miners need to complete an intentionally difficult mathematical puzzle successfully. The hash rate is, therefore, a measure of how many times the network can attempt to solve this puzzle every second. The higher the hash rate, the better when mining as this could increase a miner’s opportunity of finding the next block and receiving the reward.
Therefore hash rate is often considered a key metric of miner confidence. After all, it shows that miners are more likely to dedicate more resources to the computer-intensive quest if they think it’s bullish on price, or they would have scaled back operations if they expected a price slide. Hence, when BTC price increases, the hash rate increases; when BTC price decreases, the hash rate also decreases.
It’s also worth noting that the higher the hash rate, the more expensive it is for hackers to attack the network. Hypothetically, hackers need to take control over at least 51% of the hash rate of a PoW blockchain to start an attack to freeze the system, stop transaction verification, or benefit from double spending. In order to execute an attack, hackers not only must sacrifice the lucrative mining rewards they get from legitimately processing transactions, they also have to ‘buy out’ miners to outweighing the possible rewards they could get. The more miners investing in the network, the greater the number of miners and the higher the cost an attacker need to payout.
As of writing time, the Bitcoin network hash rate has gone pass 102 quintillion hashes, driving Bitcoin’s two-week average hash rate to cross another major threshold, reaching 85 EH/s and mining difficulty was adjusted to a new record of nearly 12 trillion, jumped 60% since June 14, 2019.
Miners are fully aware that the record-high hash rate would eventually lead to more intense competition to obtain block reward (i.e. a higher operational cost), yet the number of miners just kept on increasing — more than 600,000 powerful new machines came online within the last three months, according to the data from crypto mining pool BTC.com.
Why are miners so confident about Bitcoin’s price?
HODLERS & The Bull Rally Ahead
The bullish sentiment steams from the scheduled Bitcoin halving next year.
In less than a year’s time, Bitcoin’s third reward halving will take place in May 2020, reducing the mining reward from 12.5 BTC to 6.5 BTC every 10 minutes and Bitcoin is expected to become increasingly scarce. By that time, miners will be spending the same amount of money for a slashed-down reward — it’s logical for them to start accumulating in advance and sell them against higher demand in the bull rally. Miners’ interest to hodl constitutes to a less volatile market, allowing the price to stabilize and climb, as we’ve seen in the market before halving begins.
When miners are confident about making a profit in the long run and decide to hodl, the Bitcoin market faces less selling pressure, causing the demand to go up drastically. As more miners are expected to hit the market in the coming months before halving, it is only a matter of time before we see the bull strikes again.