After a record-breaking summer heat wave, Bitcoin mining activities pick up as electricity prices drop.
On-chain data suggests that Bitcoin’s hash rate has picked off from its summer drop-off to hit new all-time highs. The increase in computing power is directly linked to miners resuming full-scale operations following a summer cool-off caused by a record heat wave.
Source: Blockchain.com
The chart above shows that Bitcoin’s hash rate surpassed all previous records, rising by 18% since the end of August to 232 million TH/s (terahashes per second). The metric had reached its former high of 227 million TH/s at the start of the summer before rising electricity costs, and high temperatures caused it to plummet. It fell to as low as 194 million TH/s before surging to its new peak.
High Temperature, Rising Electricity Cost Forced US Miners To Shut Down Operations
Following China’s ban on mining activities, the US has become the choice destination for Bitcoin miners. This led to many of them migrating to the country and settling in Texas. The choice of the Lone star state was a no-brainer. It offers crypto-friendly regulations and cheap electricity, making it a choice location for miners.
Consequently, the US accounts for most of the global mining hash rate. But over the summer, large-scale miners in Texas were forced to dial down their operations due to several factors. Firstly, BTC’s plummeting value caused several miners to become unprofitable. Several, including Bitfarms, were forced to sell off their mined Bitcoin holdings to remain afloat. This was in reverse to their earlier Hodl strategy when Bitcoins value rose.
Secondly, Texas recorded the hottest summer in its history. The ensuing heatwave had a dilapidating effect on mining rigs. Meanwhile, the high temperature also pushed the state’s power grid to the brink leading to the government requesting users conserve electricity. A call that Bitcoin miners heeded. Therefore, as miners shut down their operations, Bitcoin’s hash rate nose-dived.
However, it has not been all doom and gloom for miners. Several handled the downturn much better than others, with the industry seeing significant consolidation. Firms like Riot, which just opened a large-scale operation in Texas, benefited greatly from the closure. The company made profits by selling purchased electricity back to the grid. Nonetheless, the drop in energy prices, temperature, and the rise in hash rate indicates that miners are resuming their work.
Bitcoins Price Plummets Following New CPI Data
While Bitcoin enjoyed a steady growth in its price last week in line with its rising hash rate, new inflation data released yesterday has seen it plummet. August’s US Consumer Price index (Index) showed that inflation had eased to 8.3%. However, this value was higher than anticipated, thus raising the possibility of a third successive 75 basis point(BPS) hike in interest rates.
One Month BTC Price Chart. Source: Tradingview
As seen in the chart, Bitcoin, which broke the $21,000 mark and rallied up to $22,000, lost all its gains in one fell swoop. According to CoinGecko, BTC declined by over 8% from $22,600 to its current price of $20,373 in the last 24 hours.
Consequently, Bitcoin’s decrease also caused other altcoins to record similar losses. Ethereum declined over 7% to $1,600 even with th merge expected to be completed this week. Solana and Cardano fell by over 12% and 6%, respectively.
Do you think that Bitcoin’s growing hash rate will cause a quick rebound in its price? Let us know your thoughts in the comments below.
Chris is a crypto enthusiast and a firm believer in the blockchain’s ability to create a new financial paradigm. Through writing, Chris hopes to expose the intricacies of this disruptive technology and how it is beneficial to Africans and developing countries. He aims to give readers a rational and unbiased outlook of the industry by equipping them with the necessary information to make enlightened investment decisions.
