Bitcoin has been on a wild ride over the past several weeks and months, with the benchmark cryptocurrency plummeting from recent highs of $10,500 to lows of $3,500 before garnering significant buying pressure that has since sent it back to its current price within the mid-$5,000 region.
This intense volatility has come about in tandem with that seen by the traditional markets, which have also been caught within an intense downwards trend over the past few weeks.
The ongoing selloff has led Bitcoin miners to be largely unprofitable, also leading the crypto’s hashrate to plummet.
The shift in miner’s profitability could have implications on BTC’s price in the near-term as well, as miners are now disincentivized from selling their crypto.
Bitcoin’s Hashrate Plummets as Miners Begin Capitulating
Although the cost to mine one Bitcoin varies geographically based on electricity rates, the recent selloff has largely made it unprofitable for miners to continue their normal operations.
As such, many smaller miners have shut off their rigs, subsequently leading the cryptocurrency’s hashrate to plummet.
Glassnode, an on-chain analytics platform, spoke about the widespread unprofitability of mining in a recent tweet, also explaining that Bitcoin’s precarious position from a price perspective has led its hashrate to see a rapid and ongoing decline.
“Due to the declining BTC price, it is now unprofitable for many miners to continue their operations. Since its peak on March 7th, the 7DMA of Bitcoin’s hashrate has fallen by ~16% – with hashing power disappearing even faster after the drop to $5k,” they noted.
Due to the declining $BTC price, it is now unprofitable for many miners to continue their operations.
Since its peak on March 7th, the 7DMA of #Bitcoin’s hashrate has fallen by ~16% – with hashing power disappearing even faster after the drop to $5k.https://t.co/5bnFHpTXfX pic.twitter.com/X9uw8hOCgD
— glassnode (@glassnode) March 18, 2020
What Implications Could This Have on BTC’s Price?
Miners provide Bitcoin with a steady and unrelenting flow of selling pressure, with them needing to sell their generated crypto in order to fund their operations.
When BTC’s price declines below the cost of production, however, miners generally sell the bare minimum required to fuel their operations, which relieves some of the selling pressure on the benchmark crypto.
This bolsters the cryptocurrency’s buyers and makes it easier for them to absorb the crypto’s selling pressure, and also incentivizes miners to continue accumulating as much BTC as possible so that they can sell it later at a profit.
Although Bitcoin could drop further from its current price levels, it is unlikely that it will stay too low for long, as the decline in miners selling should help give bulls some decent momentum.
Featured image from Shutterstock.