- Bitcoin's hashrate is recovering.
- The network took a hit from US winter storms and mining crackdowns.
- Mining difficulty could soon increase.
The Bitcoin network is bouncing back after winter storms and ongoing regulatory crackdowns knocked miners offline.
Over the past two weeks, the network’s hashrate — a measure of its combined computing power — jumped more than 20% and is approaching the level it was at before the disruptions.
That’s despite Bitcoin plummeting to a low of $60,000 during the worst market rout in almost four years.
“We’ve seen this cycle repeat so many times in the past and it demonstrates once again that Bitcoin mining is a uniquely flexible load,” Leo Wang, a vice president at Canaan, a Singapore-based Bitcoin miner manufacturer, told DL News.
“When you zoom out, the network remains very strong from a hashrate and security standpoint.”
The rebound is noteworthy because, as Bitcoin’s price drops, the miners who run the network become less profitable. Many already operate on razor-thin margins, and if prices fall too low, they may be forced to shut down because it becomes too difficult to turn a profit.
In recent months, many miners have pivoted to providing more profitable AI and high-performance computing services.
The Bitcoin hashrate rebound signals resilience among those left mining the top cryptocurrency, and conviction that the price will eventually recover.
Mining disruptions
Last month, winter storms swept across the eastern and central United States, causing widespread power cuts and rising electricity demand among those still connected to the grid.
Some Bitcoin miners temporarily went offline, while others sold surplus energy back to stressed power grids, earning far more than they would by mining Bitcoin.
“The grid may ask for that energy and the mining may turn off, but that means the grid is paying more for the energy than the miner is making by mining Bitcoin,” Scott Norris, chief mining officer at tokenised Bitcoin hashpower company Omnes, previously told DL News.
The recent hashrate recovery is mainly due to North American miners plugging back in after the winter storm, Wolfie Zhao, head of research at TheMinerMag and a partner at BlocksBridge Consulting, told DL News.
But the storms are not the only factor weighing on the Bitcoin hashrate recently.
China and Russia have recently intensified their regulatory crackdowns on Bitcoin mining, Wang said, adding that the measures have throttled operations, leading to a decline in hashrate from both nations.
In December, Russia’s Ministry of Justice proposed strict penalties for miners who steal power from the public grid or mine in areas where mining is banned.
Honeymoon ends
Bitcoin miners who were able to stay online through the disruptions have been rewarded. With fewer miners to compete with, their relative profits will have increased.
Now that Bitcoin’s hashrate is bouncing back, the honeymoon period could soon be over.
Approximately every two weeks, Bitcoin’s mining difficulty is adjusted based on the total hashrate.
According to Zhao, the network experienced an 11.4% downward difficulty adjustment on February 7 due to a decrease in hashrate.
The next adjustment, which will take place around February 20, could reverse that.
“We may see the next difficulty adjustment to be up notably again,” Zhao said.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.
