On-chain data shows that Bitcoin’s hash rate has been rising recently, indicating that miners are expanding their mining farms.
Bitcoin mining hash rate is back near all-time highs
“Hashrate” refers to an index that tracks the total computing power that miners as a whole have attached to the Bitcoin blockchain. This metric is useful for determining sentiment among chain auditors.
When the value of the index rises, it means new miners join the network and/or old miners expand their farms. This trend indicates that BTC is looking for a profitable project for this group.
On the other hand, a metric recording a decline indicates that some miners have decided to disconnect from the chain, perhaps because they can no longer break even.
Now, here’s a chart showing the trend in the 7-day average for Bitcoin Hashrate over the past year:
The 7-day average value of the metric seems to have been climbing up in recent days | Source: Blockchain.com
As shown in the chart above, Bitcoin Hashrate noticed a sharp rise last month and recorded a new all-time high (ATH). This rise in the index occurred as the price of BTC also rose. The reason behind this trend is the fact that miners depend on the price of their revenue.
Chain validators generate their income from two sources: block support and transaction fees. The former is what they receive as compensation for solving blocks on-chain, while the latter is a small payment that users attach to individual transfers.
Historically, transfer fees have tended to make up only a small portion of miners’ revenues. A chart showing how much crowd support dominates miners’ income was shared by the on-chain analytics firm Vitreous node In its latest weekly report.
The cumulative total revenue of the miners vs the total fee revenue | Source: Glassnode's The Week Onchain - Week 50, 2024
In the chart, the total cumulative revenue of Bitcoin miners (i.e. block support and transaction fees combined) is shown in yellow, while transaction fees are highlighted in red.
So far in the history of the cryptocurrency, on-chain validators have generated a total revenue of $71.5 billion. Of these amounts, only $4.2 billion was generated from transaction fees.
Now, one of the features of the Bitcoin blockchain is that the block backing remains fixed in BTC value (except during special events called Halvings, where it is permanently halved every year) and is also offered at a roughly constant rate of time.
This leaves the asset value in US dollars as the only associated variable. Thus, as the price rises, the miners’ revenue also rises, which is ultimately reflected in the insects.
Interestingly, while Bitcoin continued to grow after its high last month, the 7-day hashrate declined instead. It appears that miners have finally corrected their course as the index has reversed its trend over the past week and is now moving to challenge ATH.
Bitcoin price
Bitcoin also appears to be heading towards its ATH as its price has now crossed the $102,000 level.
Looks like the price of the coin has been climbing up over the last couple of days | Source: BTCUSDT on TradingView
Featured image from Dall-E, Glassnode.com, Blockchain.com, chart from TradingView.com