Bitcoin hash rate soars as price stumbles

Bitcoin miners have pushed the hash rate higher: Shutterstock

While the price of bitcoin has steadily declined during 2018, the cryptocurrency’s hash rate — or the amount of computing power used by bitcoin’s network of computers to create new coins — has soared as it rushes to catch up with the bitcoin price.

Bitcoin began 2017 at around $1,000 but by last December was testing the $20,000 level, leading to a huge influx of new miners adding their computing power to the bitcoin network.

Opposite paths

The currency has subsequently fallen back to its current price of $6,247, but CoinJournal reports that the bitcoin hash rate has continued to grow and has increased by more than 100% over the past four months.

While it takes time for miners to add their computing power to the bitcoin network in response to a jump in the price, the bitcoin hash rate doesn’t shrink if the price falls — suggesting miners are sticking with bitcoin even as the cost of creating a single coin continues to rise.

In addition, while the bitcoin price has been on a downward trajectory for the past seven months, a consistently climbing hash rate suggests the long-term outlook for the bitcoin price is good.

Those still bullish on its prospects include Fundstrat Global Advisors’ head of research Thomas Lee, who told Bloomberg earlier this week that bitcoin will have rebounded to $25,000 by the end of this year bitcoin will hit $25,000, more than 270% above current levels.

He bases his prediction on bitcoin’s historical trading price of 2.5 times its mining cost, which Lee expects to reach $9,000 by the end of 2018.