Bitcoin mining: new all-time high for hashrate

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On January 30, 2024, the new all-time record was set for the weekly average hashrate of Bitcoin mining.

In fact, according to the data from Hashrate Index, for the first time in history, the 565 Eh/s threshold has been surpassed.

Previously, on January 6th, the weekly average reached 548 Eh/s, but at the end of January there was another peak at 566. 

The increase in hashrate in Bitcoin mining

A year ago, when the price of Bitcoin was around $23,000, the weekly average hashrate was below 300 Eh/s, so in twelve months it has almost doubled. 

Since mid-July 2021, the Bitcoin mining hashrate has been consistently increasing, following the recovery after the significant drop caused by the Chinese ban. 

If we exclude three brief moments of stagnation, in mid-2022, at the end of 2022, and shortly after mid-2023, we went from 92 to 566 Eh/s in less than three years, although before the mid-2021 crash, the weekly average was 1870 Eh/s. 

However, by looking at the individual daily data, it is discovered that the highest peak is still the one of 614 Eh/s on December 23rd, but five days later the daily hashrate had dropped below 413 Eh/s. 

Since the beginning of December, the average daily hashrate has been fluctuating noticeably from one day to another, so the weekly averages are more indicative of the current situation that Bitcoin mining is going through.

Instead, if we take hourly averages, the maximum peak was on January 11th, when it exceeded 682 Eh/s, with another similar hourly peak the following day at 681. 

However, on January 17th there was a minimum hourly peak of only 380 Eh/s, but it was an isolated case. 

It should be noted that these are not precise data extracted from direct observation of mining activity, but estimates calculated based on final performance, namely the average time to validate a block.

The block-time

Although the Bitcoin protocol states that each new block should be mined in about 10 minutes, in reality it often takes a little less time now.

In fact, the higher the hashrate, the less time it takes on average to mine a block, and the adjustment of the difficulty that should bring the average time back to 10 minutes only occurs once every two weeks. 

For example, on January 25th the average daily block time dropped below 8 minutes, and yesterday it was just under 9 and a half minutes. However, on January 31st it was almost 11 minutes. 

It has been more than a month now that the average daily block-time is around 9 minutes and a half, and this is precisely due to a very high hashrate.

The weekly hashrate record registered on January 30th is due to a difficulty reduction that occurred on January 20th. The absolute peak of 76.2 T was recorded on January 6th and lasted until January 19th. Starting from the 20th, the decrease in difficulty also caused the average block time to decrease. 

The impact of price on the hashrate level

Contrary to what many claim, the cost of Bitcoin mining does not affect the market value of BTC. 

On the contrary, it’s the exact opposite: the price variations of BTC in the market, solely due to the dynamics related to changes in demand and supply, have consequences on the costs of miners. 

In fact, the costs of mining are effectively decided arbitrarily by individual miners, who do not agree with each other, but are in competition. 

Bitcoin mining is effectively a competition where those with higher hashrates earn more. Therefore, miners are incentivized to increase their hashrate, but the more they increase it, the more they also increase energy consumption and costs. 

Since the reward for miners remains unchanged for about three years and ten months on average, until the halving, and is paid out in BTC, when the market value of Bitcoin actually increases, the miners’ income also increases. In that case, they can afford to spend more by increasing the hashrate to try to maximize the chances of mining a block and collecting the reward. 

Therefore, behind the strong increase in hashrate in 2023, there is precisely the increase in the price of BTC, even though the price varies very quickly while the hashrate does not, since it requires purchasing new, more efficient machines to increase it. 

At present, it seems that the increase in hashrate is likely to continue, unless the price drops, at least until the April halving which will halve the reward for miners, bringing it from 6.25 to 3.125 BTC per mined block.