Bitcoin’s hashprice is nearing four-month highs as a combination of price appreciation and difficulty reduction have boosted the market value for hashrate.
- Hashprice is up almost 60% in 2021.
- Bitcoin price is up 35% over the same period.
Here’s why hashprice is going up and why that matters.
Instead of measuring mining revenue simply by the dollar value of block rewards, hashprice offers a more precise calculation for miners to assess the market value of their work. Although it’s not a widely known or commonly used metric, hashprice (dollar per terahash per second per day) is extremely important for observing the effects of bitcoin market activity on the mining sector.
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Thanks to China’s crackdown on mining, the army of ASICs that went offline caused bitcoin hashprice to soar. Bitcoin’s mild price recovery over the past month has added more fuel to hashprice’s upward trajectory.
Since the market’s crash in mid May, hashprice has significantly outpaced bitcoin’s recovery.
Hashprice is directed by two external catalysts: bitcoin’s price and mining difficulty.
- Difficulty: When more hashing power comes online, existing hashing power becomes marginally less valuable, causing hashprice to drop. So when difficulty increases due to hashrate increasing, hashprice falls. The opposite effect occurs when difficulty decreases and hashing power becomes more valuable.
- Price: Because hashprice is a dollar-denominated metric, the dollar value of bitcoin causes hashprice to climb or fall with it. All else being equal, a higher bitcoin price means a higher hashprice and vice versa.
The graph below shows examples of hashprice fluctuations caused by: large difficulty adjustments (purple); bitcoin’s price action (green); and a combination of both (blue) when bitcoin’s price fell and difficulty increased at the same time.
Small difficulty adjustments aren’t easily seen on a linear hashprice chart. And sometimes the effect of small difficulty changes are offset by an opposite change in bitcoin’s price.
In short: now is a great time to mine bitcoin.
Hashprice will always fluctuate with difficulty and bitcoin’s price. But for as long as the current golden age of profitability lasts, miners will relish it.