"Price Follows Hash Rate": Bitcoin's Mining Activity & Difficulty on the Rise

Coinciding with a two-year price high of more than $19,000, Bitcoin’s mining difficulty is showing some upward motion. BTC’s mining difficulty has increased by 7.26 percentage points. Yesterday, the increase read at 8.9 percentage points. At press time, mining difficulty appeared to be continuing along the way up.

According to Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Read this Term data Analytics Analytics Analytics may be defined as the detection, analysis, and relay of consequential patterns in data. Analytics also seeks to explain or accurately reflect the relationship between data and effective decision making. In the trading space, analytics are applied in a predictive manner in an attempt to more accurately forecast the price. This predictive model of analytics generally involves the analysis of historical price patterns that are used in an attempt to determine certain price outcomes. Analyt Analytics may be defined as the detection, analysis, and relay of consequential patterns in data. Analytics also seeks to explain or accurately reflect the relationship between data and effective decision making. In the trading space, analytics are applied in a predictive manner in an attempt to more accurately forecast the price. This predictive model of analytics generally involves the analysis of historical price patterns that are used in an attempt to determine certain price outcomes. Analyt Read this Term provider, Glassnode, yesterday’s increase brought Bitcoin’s mining difficulty within 4.4 percentage points of its current all-time-high.

#Bitcoin mining difficulty increased by 8.9% today.

It is now only 4.4% below its ATH.

Chart: https://t.co/qtmuDmTfGS pic.twitter.com/1eX63yBAgc

— glassnode (@glassnode) November 29, 2020

Mining difficulty is a term that describes how difficult it is for nodes on the bitcoin network to solve the cryptographic equations that are necessary for mining activities. The difficulty increases along with the number of miners on the Bitcoin network to ensure that new Bitcoins are not put into circulation too quickly.

Therefore, the increase in difficulty seems to indicate that there has been an increase in the amount of mining activity that is currently happening on the Bitcoin network. This is supported by an increase in the amount of hash power (computer power needed to solve cryptographic equations) on the Bitcoin network throughout the month of November.

”Price follows hash rate.”

According to some analysts, both the increase in mining difficulty as well as the increase in hash power are long-term bullish indicators for the price of Bitcoin.

For example, renowned market analyst and broadcaster, Max Keiser always says that “price follows hash rate”: if the hash rate goes up, the price will follow (and vice versa).

And indeed, CoinTelegraph reported that “a rise in mining difficulty marked the start of bull cycles in 2013 and 2016, though it remains to be seen whether the coin’s recent rally to within 3% of its ATH price is long-term bullish.”

Therefore, in spite of a percentage drop of more than 10 points that occurred last week, it is possible that Bitcoin’s recovery could lead it to $20,000 by the end of the year.

As the price of Ether (ETH) has risen to its highest point in over a year, mining difficulties on the Ethereum blockchain have also shown serious growth. According to Glassnode, Ethereum’s mining difficulty was at a two-year high on Friday. Interestingly, the increase in mining difficulty followed a three-day drop in token prices from $600 to $513. At press time, Ethereum’s price was roughly $580.