Bitcoin Prices Plunging, Will Miners Begin Switching Off Rigs?
Bitcoin prices are under immense selling pressure as of writing on Apr 20. This occurs when the mining difficulty and hash rate reach record highs.
Bitcoin prices falling
BTC is trading at around $28,100, around 7% below its April peaks. Also, looking at the performance on the daily chart, it looks like the bears are pushing, anchoring on the bearish candle of the 19th of April.
Losses on April 19 were deep and reversed refreshing gains from earlier this week. The resulting bar also had decent trading volumes, suggesting that traders were eager to sell.
BTC is currently trading below key resistance levels set in April. Currently, $31,000, marking the high of April 2023 and H1 2023, remains a crucial reaction point that the charts are watching closely.
The price drop on April 20 also forced Bitcoin below the 20-day moving average, or the average BB, for the first time since March 13. Silicon Valley Bank (SVB) run provided tailwinds.
The March 13 rally may have provided an anchor that saw BTC surge over 55% from mid-March to $31,000 in early April.
Hash rate and mining difficulty at record levels
With Bitcoin prices falling after a 90% increase since December 2022, the hash rate and difficulty have increased.
The hash rate is a measure of the computing power channeled by miners to secure the Bitcoin network and ensure that all transactions included in a block are valid.
Miners are special entities that operate special equipment that provides 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 depends on the hash rate and is set at a protocol level. It determines how easy or difficult a miner can confirm transactions and add a block to the blockchain approximately every 10 minutes.
Bitcoin hash rate currently stands at over 355 EH/s, and in records. Miners appear unfazed by the state of price action and continue to operate equipment despite falling prices. This has been the trend in the first four months of 2023, when the hash rate increased from 253 EH/s on Jan 1st to current levels.
Due to the direct correlation between hash rate and difficulty, miners are finding it difficult to mine new blocks and need to upgrade their chipsets to efficient versions to stay competitive.
In the last five sessions, the Bitcoin network has adjusted difficulty upwards to 48.71T, with the last adjustment being on 20th April. This year alone, Bitcoin difficulty has increased by 41%; which means miners have to use more computing power to discover blocks.
As the hash rate and price diverge, it remains to be seen whether miners would have to temporarily shut down platforms and save on operating costs.
Canva resource image, TradingView chart