There has been a real resurgence in Bitcoin mining in recent days.
PlanB points this out on its Twitter profile even going so far as to claim that miners are signaling the beginning of a new bull run.
— PlanB (@100trillionUSD) October 4, 2022
What has been happening since mid-August may indeed seem anomalous.
Is a Bitcoin bull run on the way?
Bitcoin mining is a competition, in which for every block one miner wins the entire prize. This prize consists largely of a fixed sum in BTC that changes only every four years due to the halving. The next halving is scheduled for spring 2024.
Since the reward is in BTC, should the market value of Bitcoin go down so does the real value of the reward for the miners. In part, because essentially the number of blocks being mined each day is fixed, or at least varies little.
For example, in mid-August, about 144 blocks per day were being mined, each with a reward of 6.25 BTC for the miners. In total, therefore, each day miners collectively collected about 900 BTC. At the market price at the time these corresponded to about $22 million.
Lately, about 160 blocks per day are mined, with a total daily reward of about 1,000 BTC. At current prices, these correspond to about $20 million.
So the real value of BTC cashed in daily by the miners right now is significantly less than the BTC they were collecting in August.
At this point, one would think that because of the reduction in revenue, the miners have been forced to cut back a bit, perhaps reducing electricity consumption by turning off some machines or suspending hash mining at certain times.
The fact is that not only has this not happened, but actually the opposite has taken place.
In fact, since mid-August, the total hashrate used globally for Bitcoin mining has risen from just over 200 Ehash/s even above 270 Ehash/s, a 35% increase in a month and a half thanks to which new all-time highs have been set.
But how is it possible that in the face of a reduction of about 10% in inflows, miners have increased their work by 35%?
Hypotheses supporting the rise in hashrate
The first explanation that would come to mind is that it could be the classic “long wave” of hashrate growth, which occurs consistently much later than price growth. But over the summer, price growth was minimal compared to the values touched in the spring. So this hypothesis must be discarded.
The second explanation is that the recent increase could be due to the replacement of older, less efficient machines with more efficient mining machines, capable of either reducing consumption, and thus expenses, for the same performance, or increasing performance for the same consumption.
This phenomenon has actually already been going on for many months, and it can hardly explain a 35% increase in hashrate in a month and a half in the face of a reduction in takings.
That leaves a third hypothesis, namely the one launched by PlanB: miners may be hoarding in the hope that the price of Bitcoin in the coming months will take off.
It is worth noting that miners who do not sell the BTC they cash in right away, holding them instead to sell at a later date, could theoretically increase the value of their revenue should they be able to sell them at a higher price than when they cash in the BTC.
However, there is no certainty, neither that this is the dynamic behind the recent sharp increase in hashrate, nor that the miners are correct that the price of BTC will increase in the coming months.
On the other hand, the current market value seems decidedly low, especially when compared with the average value last year. In the past, during the years following the big post-halving speculative bubbles of 2013 and 2017, the average annual price has always been higher than that of the years of the speculative bubbles. So one could expect that even in 2022, the average annual price at the end of the year could be higher than in 2021.
The year 2021 ended with an average annual price of Bitcoin above $47,000, while the current price is less than half that. Therefore, it is not at all far-fetched to assume that miners are hoping for the next increase in the value of BTC as early as the last months of 2022.