As we all know, bitcoin has spent the last few days gaining steam and jumping into higher ranges. While we’ve been quick to assume it has something to do with the political unrest due to tension between the U.S. and Iran, another source is claiming something different.
The Bitcoin Hash Rate May Have Something To Do with This
Bitcoin first began jumping upward on January 3 following a U.S. drone strike on Iran that killed off one of the latter country’s top generals. From there, bitcoin – which had been traversing through the high $6,000 range over the past day, suddenly jumped beyond the $7,000 mark. It has been on something of a roller coaster ever since, spiking by anywhere between $100 and a few hundred dollars each day until early yesterday morning when it fell back into the $7,000 range.
We’ve always assumed that relations between the U.S. and Iran had something to do with bitcoin’s spike, but according to some analysts, the hash rate may be behind the currency’s quick jumps. The rate has been moving northward at an alarming rate, suggesting that more miners are entering the space and working harder to extract more coins.
This makes perfect sense when one considers the circumstances. In May of this year, the currency is set to undergo a halving that will cause the mining rewards to be cut in half. Naturally, it seems like all miners want to get in on the action quickly and extract as many new coins as they can before their earnings are significantly reduced within the next four months.
Mati Greenspan – former analyst at e-Toro – comments that the hash rate has risen in the past far more than the price has. He states:
It is possible that speculation on bitcoin’s rapid growth in hash rate is also contributing to the price action lately. However, let’s be clear that there’s a huge difference between hash rate growth and cost of production. The latter is what more strongly correlates with bitcoin’s price but is also unfortunately much more difficult to determine.
Not Everyone Agrees
Others, however, aren’t as convinced, and are still pushing the idea that bitcoin’s price has something to do with geopolitical unrest. Adam Vettese – senior account manager at e-Toro – comments:
I wouldn’t go as far as to say the hash rate is behind the rise instead of U.S.-Iran tensions. Whilst we have seen some correlations between hash rate and price, it isn’t always the case. The rally is much more likely a combination of the geopolitical situation and a strong bounce off technical support. Coincidentally, we have now seen the situation subside at the same time the price reached a key resistance level.
A recent report suggests that the costs of extracting new bitcoins now exceed $6,300, meaning BTC could potentially fall to this figure.