The Daily Dive #008 - Hash Rate In Free Fall

In last Thursday’s Daily Dive, we covered the hash ribbons indicator and what it meant for the price of bitcoin. Since that writeup, hash rate has fallen even more, and it seems that the exodus out of China is the catalyst.

Since the beginning of May when hash rate was at an all time high, hash rate on the Bitcoin Network has fallen by approximately 29.6%.

With the falling hash rate, Bitcoin has witnessed two straight downwards difficulty adjustments, of -15.97% and -5.30% respectively, with another of -16.1% estimated to be coming within the next week.

The fall in hash rate has placed immense strain on remaining miners on the network, who have seen their margins reduced due to slower block times.

Since June 1st, the bitcoin balance in miner wallets has been reduced by 5,741 BTC, a confirmation that miners are facing increasing pressure.

It is also very likely that miners who are geographically located within China that are moving elsewhere are having to liquidate some of their bitcoin to cover the costs associated with exiting the region.

Following the next downwards difficulty adjustment, and the gradual deployment of mining rigs previously located in China coming online, expect hash rate to increase significantly and for miner profitability to improve.

The most bullish aspect of the miner exodus out of mainland China is that the extremely misinformed take that Bitcoin is “centralized” or that “China controls Bitcoin” can die once and for all. While it was never true in the first place, it takes a rather detailed understanding of bitcoin to know that nodes control the network, and not the miners.

In tomorrow’s Daily Dive, we will take a look at what the derivative markets are currently telling us, and if further capitulation should be expected in the bitcoin market.