Analysis of the Relationship between Bitcoin's Computing Power and Price

Analysis of the Relationship between Bitcoin's Computing Power and Price

Since the beginning of this year, the computing power of the entire Bitcoin network has continued to rise, rising from a maximum of 40EH / s at the beginning of the year to 110.6EH / s, and currently remains at a high of about 95EH / s.

There was also a voice of rising currency prices in the market. So, is there really a significant correlation between computing power and currency prices? Today, we will perform a simple analysis for everyone._Whatsminer

What is computing power / wide network computing power?

Everyone knows that Bitcoin is generated by a random hash collision of a mining machine, and how many hash collisions a mining machine can do per second represents the size of its "computing power". The unit is hash / s (H / S), which is also a requirement of the proof-of-work mechanism (POW) of the Bitcoin network.

Bitcoin's entire network computing power refers to the sum of the computing power of all Bitcoin mining machines. For example, assuming that there are 5 million bitcoin mining machines in the Bitcoin network and each computing capacity is 20T, the computing power of the entire network is 100 million T, which is 10Ehash / s, which means that the computing power of the entire network can complete 10E per second. Hash calculation. The amount of computing power on the entire network represents the activity of the digital currency mining. The larger the value, the faster the growth rate, indicating that miners are optimistic about this digital currency.

Computing power and amount of coins

In the long run, over time, even if the computing power is getting higher and higher, the amount of coins mined will continue to decrease.

On the one hand, most cryptocurrencies have a declining reward mechanism. For example, the reward of Bitcoin will be halved every 4 years. The reward for mining a block in 2010 is 50 Bitcoins, while the reward for a block in 2017 is only 12.5. Bitcoin.

On the other hand, the number of miners is increasing. Even if your computing power has increased by 10 times compared to the past, the computing power of the entire network is growing faster. Your computing power may account for a decrease in the entire network. of.

Bitcoin hashrate and price

Part of the view is that Bitcoin computing power can be regarded as a leading signal of Bitcoin price, which means that the surge in Bitcoin computing power is likely to indicate that Bitcoin price will usher in a new round of explosive performance in the short term.

Judging from the trend chart of bitcoin price and computing power this year, in fact, the computing power does not directly affect the currency price, but the currency price directly affects the computing power. When the price of coins rose sharply in the first half of the year, the profits of miners increased significantly, attracting a large amount of funds, and large and small miners ran to the market one after another, resulting in an increase in the overall computing power of Bitcoin. In the second half of the year, the price of bitcoin started to fall, and the higher point dropped by about 50%, but the hashrate of bitcoin remained at a historical high.

At present, more than 80% of 21 million bitcoins have been mined, and it is said that about 3 million have been lost permanently. By April 2020, the third half of bitcoin will be halved. The reward of the block is only 6.25 bitcoins, and bitcoin will become increasingly scarce, but miners must be profitable to continue maintaining the bitcoin network.

From this point of view, although there is no direct correlation between the currency price and the computing power, the currency price must have a certain support for the industry to develop healthily._Whatsminer

Mining pattern with halving expectations

Now in the Bitcoin mining industry, one is to see the chip technology of mining machine manufacturers, the computing power consumption ratio of mining machines, and the technical competition. The other is to see the ability of miners to control the cost of electricity prices. There are very big advantages.

With the trend of large-scale Bitcoin mining, small miners and miners holding old inefficient mining machines have become difficult to survive. Large miners and consortia with strong capital are suppressing the living space of small miners. Even when the price of the currency is too low to pay the cost of electricity, large miners can continue to dig at a loss, but it is difficult for small miners to survive.

Therefore, under the expectation that the currency price will continue to fall or even fall below the cost price of miners, mainly Bitcoin miners and large mines are continuing their layout and investing in R & D and mining machines. Reasons for increasing force and maintaining high levels.

At the time of the halving of Bitcoin, the big mines have already entered the ambush in advance. It is not difficult to foresee that after the Bitcoin is halved and small miners shut down and leave, the big mines will occupy an absolute advantage, and the price of coins will Greatly influenced by these big miners.

All in all, although there is no significant linear relationship between Bitcoin computing power and currency price, the increase in computing power is the result of big miners' optimistic expectations and bullish consensus on the future._Whatsminer