Bitcoin, the world’s largest digital currency by market capitalisation, reeled under pressure after US Federal Reserve Chair Jerome Powell’s comments on raising interest rates further to tame inflation.
However, Bitcoin’s difficulty and hash rate, which indicate the state of the cryptocurrency network, rose rapidly. Some analysts said Bitcoin’s difficulty level is poised to hit an all-time high next week.
The hash rate refers to the total computational power that is used to mine and process transactions on a blockchain such as Bitcoin and may indicate where the market is headed. Difficulty is a parameter that shows how difficult it is for miners to validate blockchain transactions and get rewarded for it.
The difficulty level typically has a positive correlation with the Bitcoin price and hash rate. Usually, when the price of Bitcoin drops suddenly, mining revenue falls, lowering the rewards. The network hash rate also starts to drop, taking the difficulty level lower.
The price of Bitcoin has fallen by about 7 percent during the past week. The market capitalisation of Bitcoin is less than $383 billion currently, down from $1.27 trillion in November 2021.
Although the value of Bitcoin dropped this past week, it hasn’t deterred miners who maintain the Bitcoin blockchain.
Fundamental indicators are firmly in “up only” mode as August draws to a close since hardware and competition have returned to the network. This has been captured by the Bitcoin difficulty, which is anticipated to increase by 6.8 percent next week to a record level.
This will be the largest upward difficulty adjustment since January, according to information from the on-chain monitoring service BTC.com.
“We may see a difficulty jump doozy enough to set a new (or close to new) ATH (all-time high) in a few days,” Bitcoin mining consulting company Blocksbridge predicted in a recent analysis.
The research also stated that the present environment was difficult for all network users, and owners of older equipment were feeling the pinch as a result of dropping spot prices and a corresponding decline in the value of block subsidies and fees in relation to expenditure like power.
According to Blocksbridge, individuals with ineffective mining fleets are being crushed by the bear market.
The hash rate was 246 exahashes per second (EH/s) as of August 22, according to tracking website MiningPoolStats. This was a decrease from the record-breaking 251 EH/s measured in late April.A change in the hash rate value does not necessarily signify a shift in miner activity because it is always an estimate.