The larger market has tried to understand the value of Bitcoin over the past few years. While many usually fixate on its market price as an asset, others derive something more fundamental such as Bitcoin facilitating financial freedom.
Keeping in line with that, the network of Bitcoin i.e the blockchain itself, is equally important. Over time, its value may have contributed to BTC’s price movement.
Before diving into the specifics, however, let us analyze the recent state of the Bitcoin blockchain.
The Hash rate incident and difficulty adjustment
The crypto-industry is notoriously known for its short-term memory and many have forgotten the recent hash rate dilemma. On 9 July, the hash rate dropped down to 88 EH/s, a level that was the lowest registered hash rate since 2019.
At press time, the same seemed to be undergoing recovery, climbing by 15% over the past few days. In fact, the rate was back above 100 ETH/s. Similarly, network difficulty also witnessed four periods of negative adjustment, something that hasn’t happened since 2011. So, both price and hash rate are seemingly heading in the same direction.
Now, over time, there hasn’t been a predominant correlation between them.
Source: Ecoinometrics
In fact, data suggests that whenever the price has been on an incline, the hash rate has not particularly picked up a similar trajectory. Now, under technical schematics, it makes perfect sense. When the price is on an incline, miners have more of an incentive in mining Bitcoin and setting up mining operations during bullish rallies can be hectic. There is added competition and miners need to evaluate how long mining will remain profitable.
In line with the same thought, this is where Bitcoin’s network value kicks in. This urgency to mine Bitcoin only arrives when BTC’s price is maintaining a higher average. This triggers a rise in hash rate, something that has historically initiated strong bullish rallies.
Bitcoin miners’ standpoint
Therefore, it can be inferred that BTC miners do remain extremely involved with the network value, and whenever they are capitulating or accumulating, it is also largely dependent on how valuable BTC’s network is, at any given time.
When miners begin to capitulate, it is a sign that they are witnessing a drop in inherent network value, which inadvertently lags BTC’s price on the chart. Therefore, the network value of Bitcoin remains an important part of BTC’s trend trajectory, with its current recovery only helping its cause for a sustained climb up the charts.
