KEY POINTS

  • Bitcoin's hash rate hits record high following weeks of lower mining difficulty
  • Miners may have capitulated in the previous weeks, as identified by lower mining difficulty
  • It's also possible that favorable weather conditions and new equipment may have contributed to miners turning on their operations again

Despite the recent BTC price action, Bitcoin’s mining difficulty has increased last week to a record high of over 17.3 trillion, a 9.89% increase from previous levels.

The increased mining difficulty and hash rate, often described as bullish signals, are welcomed by investors and traders who were previously concerned when the hash rate dropped after the Bitcoin halving.

The hash rate is the measurement of the processing power of the Bitcoin network. When Bitcoins are mined, verified transactions must be "hashed" before they get added to the growing chain of blocks (the blockchain). To create the hash, the mining participants must solve a difficult mathematical puzzle, and the hash rate is the measure of how many times the network can complete the puzzle every second.

The hash rate often also correlates to mining difficulty. If the mining difficulty is high, it means more miners are competing to solve the math puzzle and for the 6.5 BTC block rewards. More miners also mean many entities are securing the Bitcoin blockchain network, a positive signal. A low mining difficulty means fewer miners and that the Bitcoin blockchain is less secure. Fewer miners are often the result of miner capitulation, an event when miners decide not to mine Bitcoins anymore because the profits they get are lesser than the cost of the mining operation. 

Miners have probably capitulated after the Bitcoin halving, as identified by the lower difficulty in the previous weeks.

However, the increased difficulty this week suggests either miners have turned on their operations again or new miners have powered their newer miner rigs. 

It could also be the result of favorable mining conditions. For example, mining operations on China, the country that controls 85% of the BTC hash rate, may have resumed operations again because the rainy season in the country translates to lesser electricity costs when running Bitcoin mining farms.

Bitmain, the leading manufacturer of mining equipment, recently released its news ASICS, which are application-specific integrated circuit mining devices designed for the sole purpose of mining cryptocurrencies. The new mining rigs are more efficient and more powerful than previous models.

Bitcoin was created in 2008 Bitcoin was created in 2008 Photo: AFP / JACK GUEZ