What Does the Drop Mean for Bitcoin?
Bitcoin seems to have recovered somewhat from its tumble earlier this month. Its price fell from roughly $7500 on March 12th to a low of $4400 on March 13th. Since then its price has recovered mostly from the fall and is currently trading at $6637. It has been trading above $6000 for the past week or so and has remained relatively stable.
Despite Bitcoin's price remaining stable, there has been a drop in both Bitcoin's hash-rate and difficulty algorithm seen today. This has been noted by former Head Analyst of eToro and founder of Quantum Economics, Mati Greenspan who noted the 23% decline in Bitcoin's hashrate.
Looks like the miner capitulation phase started early this halving season. Now down 23% from the peak. pic.twitter.com/GkLbnMHMmK— Mati Greenspan (tweets are not trading advice) (@MatiGreenspan) March 26, 2020
Bitcoin's Difficulty Algorithm and Explanation for Dip
The decline in hash-rate coincided with a tumble in Bitcoin's difficulty algorithm. The difficulty algorithm has decreased by roughly 15% in the past several days.
Hypothetically this could be seen as a boon to smaller miners or miners with older equipment, as they could become profitable again. Altcoin miners might also be tempted to switch over to Bitcoin due to the drop in difficulty as well.
We reached out to Alejandro De La Torre, VP of Poolin, a leading mining pool to ask him about the decrease in hash-power.
"The hash-rate dip has a lot to do with the price decline" he explained. "Many miners were priced out, which made the difficulty tip earlier today. Add the Corona and the upcoming halving into the mix and you end up with a lot of stressed out miners."
"Although this dip will give smaller miners a small window of 16 days until the next difficulty algorithm adjustment to make some profits or miners with less efficient mining equipment."
It seems that Bitcoin's hash-rate and difficulty algorithm might increase in the future depending on Bitcoin's price. This will increase Bitcoin's difficulty algorithm in due time as well.
Seeing that Bitcoin's price has mostly recovered, and is faring much better than most traditional markets, it just seems to be a matter of time until its hash-rate recovers.
Written by Jonathan Ganor
Writer & cryptocurrency aficionado