‘Hash Follows Price’ – Apart from all the other correlations in and outside of the crypto-markets, this short-term trend has been intact more often than not.
The recent dip in price is now causing a considerable drop in the hash rates as well. Moreover, reports of miner capitulation are rampant as well. Technically, many of these miners are better of buying Bitcoin than running their systems at a lot.
The twitter handle of one of the largest mining pools, f2pool notes on the total hash-rate drop,
The network hashrate has dropped from a peak of ~124 EH/s to ~102 EH/s, while the bitcoin price has dropped from $9000 to $4800.
There is always a time lag for hashrate to decrease due to hosting contracts, and time required for operators to turn off a large number of machines.
— f2pool (@f2pool_official) March 16, 2020
Is it Time to create FUD?
However, as recently reported on CoinGape, creating a FUD over price and shutdowns is rather uncalled for and informed at best.
Bitcoin mining is a huge industry with large scale miners leading the pact. These industries usually engage in long-term contracts with electricity providers, and also use hedging techniques through options and futures contracts. Hence, to think that miners are running out of business within one week from the crash is unreasonable.
The total hash rate is now below 100k Th/s level after reaching a high of nearly 135k Th/s recently. Nevertheless not more than 1 year ago, the total hash rate was around 40k Th/s. With increasing hash rate, it has gotten more difficult for small miners to survive. However, the doubling since in less than a year is evidence of massive profitability last year.
The miners are known to switch their old rigs back on and off when the profitability changes. Moreover, as recently reported on CoinGape, the new age miners which are about to flood the markets are far more cost efficient.
Nevertheless, as the FUD takes over the market leading traders and analysts are now looking for reversal. Light (alias), a prominent trader tweeted,
If I had to choose just one lesson to keep after years of trading crypto, it would be this:
When people start trotting out the miner capitulation narratives, make sure you're long BTC.
— light (@LightCrypto) March 17, 2020
Now that the narrative has switched from “halving is going to be bullish” to “miner capitulation” it’s time to look for longs again. He also added, Give it some time.
The Coronavirus effect continues to cause fear in the markets as the world is still battling the deadly virus. The swing low at around $3,600-$3,800 could be the bottom if price reverses in the midst of panic.
Do you think Bitcoin’s price is ready for another pre-halving pump or coronavirus scare will get worse? Please share your views with us.