Bitcoin Hashrate & Price

Bitcoin Hashrate vs Price Explained

This chart overlays two very simple charts

- The Bitcoin Price Chart
- The Mining Hashrate Chart

The idea behind this chart is to illustrate any correlation between the price of bitcoin (shown in green) and the hashrate (shown in purple). Proponents of this chart assert that traders might be able to determine the direction prices will go based on how much hashing power is being lost or added to the network. If hashrate goes down, this might indicate bearishness on the part of miners or weakness in the market causing downward pressure on the price.

Criticisms of This Chart

The most obvious criticism is that generally, there is almost no correlation between price and hashing power. In fact, when one looks at the chart, one notices that while the price of bitcoin is all over the place, hashing power is steady line that goes almost constantly upward. The other criticism is that proponents get this relationship backwards. Miners live and die by the profitability of their operation which is a function of their cost of electricity and the price of bitcoin. If you ask almost any miner, they will tell you that it is not hashrate that affects the price of bitcoin. Rather, it is the price of Bitcoin that affects the hashrate. When the bitcoin price is high, more hashrate joins the network as less efficient miners can remain profitable due to fatter margins. As the price goes down, the margin thins and fewer miners can remain profitable. Despite this fact and any local, short term correlations, we still see hashrate tending to increase over the long term and that is because most ASICs eventually find themselves in the hands of more efficient miners who buy up the hardware once owned by their less efficient competitors. In other words, no hardware remains idle as long as there is someone who can mine with it for a profit.