Bitcoin (BTC) hash rate hits a new all-time high over the course of the weekend, Glassnode data shows.
It is expected that the increase in hash rates will also lead to an eventual increase in the difficulty of validating newer blocks — making it more difficult to produce new ones.
— glassnode (@glassnode) May 3, 2020
What does an increase in hash rate mean for BTC?
According to Blockchain.com, mining hash rate is a “key security metric.” In other words, hash rates reflect how secure the network is against attacks.
Simply put, increased hash rate means that the BTC blockchain is less vulnerable to security breaches or theft.
The network’s collective hash rate points to its hashing power. BTC’s hashing power is estimated from a calculation of the number of blocks created daily and the difficulty of mining new blocks.
Many believe that the rise in hash rate reflects the sentiment of the BTC community on the upcoming halving. Since there are only a few days left before the big event, miners are possibly after the current rewards before they are halved.
Block explorer data has witnessed the production of 16 blocks within just an hour on Friday, May 1. This figure far exceeds the daily average of six blocks created per hour.
Étienne Larrivée, a developer at Satoshi Portal, tweeted about this sudden increase in the number of blocks created in an hour that day, hailing it as “a lucky minute.”
15:02 was a lucky minute! pic.twitter.com/xpw8GAS0pT
— Kexkey (@Kexkey) May 1, 2020
What was happening in the background?
A good indicator of blockchain traffic is the mempool size. The mempool is where BTC transactions are found before they are confirmed by miners and placed into new blocks.
The mempool size that was seen during the weekend of May 1 and 2 were also reportedly high. This meant that the traffic in the network was high as well.
High network traffic in the blockchain can somehow be considered a beneficial situation for large miners. Because traffic congests the blockchain and causes longer confirmation times, miners can ask for a higher fee for transaction prioritization.
In such a case, miners can make the most out of the remaining blocks yet to be created before the halving happens.
Future directions after the halving
There are many among the BTC community who believe that most miners might be forced to shut their operations down following the halving. Because mining is high on energy-consumption, the drop in BTC rewards could make it less profitable for them to continue.
There are fears that “capitulation” might happen after the halving – a period of “strong selling activity.”
For miners to remain in operation, there is a possibility that most of them will sell the rewards they have. When that happens, more BTC might end up in the market and influence a drop in its price.
Nevertheless, the rise in BTC hash rates this weekend signal one thing: BTC halving is inching closer and closer.
Featured image courtesy of Marco Verch/Flicker