Bitcoin Prices Plunging, Will Miners Begin Switching Off Rigs?
Bitcoin prices are under immense selling pressure when writing on April 20. It comes as mining difficulty and hash rate soar to record highs.
Bitcoin Prices Falling
BTC is trading at around $28,100, down roughly 7% from April peaks. Moreover, looking at the performance in the daily chart, it looks like bears are pressing on, anchoring on the April 19 bear candle.
Losses on April 19 were deep and reversed refreshing gains of early this week. The resulting bar also had decent trading volumes, suggesting traders were eager to sell.
Presently, BTC is trading below key resistance levels established in April. Currently, $31,000, marking April 2023 and H1 2023 high, remains a crucial reaction point that chartists are closely watching.
Bitcoin Price On April 20| Source: BTCUSDT On Binance, TradingView
The drop in prices on April 20 also forced Bitcoin below the 20-day moving average, or the middle BB, for the first time since March 13. On this day, BTC prices rallied as the banking crisis in the United States, following the bank run of the Silicon Valley Bank (SVB), provided tailwinds.
The rally on March 13 may have provided an anchor that saw BTC rally by over 55% from mid-March to $31,000 in early April.
Hash Rate And Mining Difficulty At Record Highs
With falling Bitcoin prices following a 90% surge from December 2022, the hash rate and difficulty have been rising.
The hash rate is a measure of computing power channeled by miners to secure the Bitcoin network and ensure all transactions included in a block are valid.
Miners are special entities operating special gear that supply computing power to the network. This is because Bitcoin is a proof-of-work blockchain and relies on a community of miners for decentralization and security.
The difficulty is hash rate-dependent and is set at a protocol level. It determines how easy or hard a miner can confirm transactions and add a block to the blockchain roughly every 10 minutes.
Presently, the Bitcoin hash rate stands at over 355 EH/s, and at record highs. Miners appear unfazed at the state of price action and continue to operate gear despite falling prices. This has been the trend in the first four months of 2023, when the hash rate rose from 253 EH/s on January 1 to current levels.
Because of the direct correlation between hash rate and difficulty, miners are finding it tough to mine new blocks and have to upgrade their chipsets to efficient versions to remain competitive.
In the past five sessions, the Bitcoin network has adjusted difficulty upwards to 48.71T, with the last adjustment being on April 20. This year alone, Bitcoin difficulty has increased by 41%; meaning miners have to use more computing power to discover blocks.
As the hash rate and price diverge, whether miners would have to temporarily switch off rigs and save on operational costs remains to be seen.
