Bitcoin’s hash rate has been slowly declining throughout November, mirroring similar levels in early August this year. Currently, the hash rate is roughly 40,349,974 TH/s after rebounding from a 4-month low of approximately 34,727,437 TH/s.
The declining hast rate is the steepest decline in the legacy cryptocurrency’s history, dropping nearly 44 percent from its all-time high in late August 2018.
Bear Market Correlation and Low Mining Profits
Bitcoin’s hash rate has historically correlated fairly closely to price movements. The recent downturn in Bitcoin’s price is reflected in the sharp decline in the hash rate. Further, mining profits have been reduced with increasing competition and decreasing prices. The difficulty has also appropriately declined in parallel with the decreasing hash rate.
Despite the recent downtrend in the hash rate, it is still nearly 4 times larger than it was in December 2017 and approximately 40 times larger than in February 2016.
The average cost of mining one Bitcoin has estimated to vary substantially depending on numerous factors, such as electricity costs in a specific area. With the price sitting at approximately $4,300 at the time of this writing, and below $6,000 for more than a week, many miners are likely operating at a current loss, however.
Large mining players like Bitmain are much better suited to handle market downturns than smaller miners, who cannot sustain operating at a loss for as long. The declining hash rate is likely representative of many smaller miners shutting down their rigs in the short-term during the bear market, especially after it has been ongoing for the last 10 months.
Projecting the market dynamics of Bitcoin’s young mining industry is challenging, especially considering the emergence of increasing competition. However, as Bitcoin grows — regarding mainstream adoption and the underlying technology — the mining market should follow suit and the reduced hash rate should be relatively insignificant when compared to just how far the network’s growth has come so far.
Ethereum Mining Problems
Ethereum has been suffering similar mining woes, as outlined by a report from U.S.-based firm Susquehanna earlier this month. According to the report, GPU mining with Ethereum is no longer profitable, reaching zero profitability on November 1st.
Ethereum has sustained a massive decrease in price, currently down 92 percent from its ATH. For comparison, Bitcoin is down 79 percent from its ATH in January earlier this year. Susquehanna details Ethereum’s decreasing mining profitability as due to downward price pressure and a decreasing network hash rate.
Ethereum’s hash rate is currently reflecting similar rates all the way back in February this year and has declined roughly 27 percent from its ATH in August 2018. Ethereum’s hash rate case also presents a more complicated dynamic, as the network is slated to transition to a Proof-of-Stake consensus model in 2019 and the recently delayed difficulty bomb will decrease the mining reward to 2 ETH.
The declining hash rates in Bitcoin and Ethereum are largely corresponding to the market downturn over the last few weeks. How long the declining rates and bearish sentiment persist is unclear, but compared to the meteoric growth of both networks’ hash power, the recent decline is not indicative of any serious problem.