BTC Hashpower Doubles During Bear Market as Miners Sacrifice Profit for Position

According to Fundstrat analyst Sam Doctor, it appears Bitcoin Core (BTC) hashpower has doubled since just before the start of summer. That figure is impressive considering the lingering and deep bear market. “Even with upgrades to existing equipment, implies almost 1GW of new power consumption vs 5.2GW in May ’18m” Mr. Doctor tweeted. “Breakeven now $7,300 ($5,300 cash BE) vs. $6,000 in May.” An exchange report confirms miners might also be accepting lower shorter term gains in favor of market position. 

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BTC Hashpower Doubles Since May in Bear Market

As indicators go, increases in the BTC difficulty and hashrate are considered pluses, potentially adding robustness and resilience to the network. That miners might be continuing to plod along in a bear market, and in the face of huge price drops and their own profits, could signal better days for all, concerned proponents are concluding.

One theory about why this might be occurring comes from crypto exchange Bitmex. They claim powerhouse mining operations such as Bitmain have welcomed market prices bottoming out, as it pushes out weaker hands and helps increase its relative position. “These low prices are likely to be a deliberate strategy by Bitmain,” the exchange explains, “to squeeze out their competition by causing them to experience lower sales and therefore financial difficulties. In our view, herein lies the key to one of the main driving forces behind the decision to IPO. A successful IPO may increase the firepower available to continue this strategy and eliminate an advantage rivals could have by doing their IPOs first.”

Bitcoin Core hashpower has gone up 2x since May, and in the face of a brutal, near 70% percent price slide. That’s being claimed by Fundstrat, the favorite Wall Street investment firm of the cryptocurrency community, if media sourcing is to be believed. Its head, Tom Lee, is often put forward as a bullish pundit for crypto. “Despite BTC bear market,” Fundstrat’s analyst Sam Doctor tweeted, “hashpower doubled since May to 57 EH/s – Even with upgrades to existing equipment, implies almost 1GW of new power consumption vs 5.2GW in May ’18. Breakeven now $7,300 ($5,300 cash BE) vs. $6,000 in May.”

Bitmain Reportedly Gaining Market Position

BTC mining difficulty will be lowered, should the amount of hashpower drop. The inverse, of course, is also true: it becomes harder for miners to find blocks when the difficulty rises, which means miners will earn less. On top of that, BTC rewards change about every four years, and thus mining revenue is at the mercy of mining difficulty and its volatility.

So it’s not too controversial to expect that as BTC’s price has plummeted, along with mining revenue, the hashrate would follow as well. Mr. Doctor is suggesting otherwise. In fact, in a little less than half of a year, miners seem eager to not pack up or slow. They seem to be accepting less profit. Seconding Mr. Doctor, Fundstrat head Tom Lee tweeted, “Updated estimates of fully loaded breakeven cost (now $7300 vs $6000 previously) for #btc based on the quant model developed by our quant/data scientist @fundstratQuant #bitcoin @BITMAINtech.” Mr. Lee has long maintained BTC often trades north of two and a half times its mining cost. Mr. Lee terms the “breakeven cost” associated with mining as a support line, a solid bottom, for BTC.

Is hashpower doubling in this case a positive sign for BTC? Let us know in the comments below. 

Images via Shutterstock.

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