The Bitcoin network is rebounding after winter storms and an ongoing regulatory crackdown drove miners offline.
The network’s hashrate, a measure of its combined computing power, has jumped more than 20% in the past two weeks, approaching pre-outage levels.
This comes despite Bitcoin plummeting to as low as $60,000 during the worst market rout in nearly four years.
Leo Wang, vice president of Singapore-based Bitcoin mining machine manufacturer Canaan, said: “We have seen this cycle repeated many times in the past, which once again proves that Bitcoin mining is a unique and flexible load.” DL News.
“When you zoom out, the network is still very strong from a computing power and security standpoint.”
This rally is noteworthy because as the price of Bitcoin drops, the miners who run the network become less profitable. Many companies are already operating on razor-thin margins and if prices fall too low, they may be forced to close as it becomes too difficult to turn a profit.
In recent months, many miners have pivoted to providing more profitable artificial intelligence and high-performance computing services.
The rally in Bitcoin’s hashrate signals the resilience of those who remain to mine the top cryptocurrency, confident that prices will eventually recover.
Winter storms swept through the eastern and central United States last month, causing widespread blackouts and rising demand for electricity that remained connected to the grid.
Some Bitcoin miners are temporarily offline, while others are selling surplus energy back to the strained power grid, earning far more than they could earn from mining Bitcoin.
Scott Norris, chief mining officer of Omnes, a tokenized Bitcoin computing power company, previously said: “The grid may demand energy and mining may shut down, but that means the grid pays more for energy than miners earn from mining Bitcoin.” DL News.
Wolfie Zhu, director of research at TheMinerMag and partner at BlocksBridge Consulting, said that the recent recovery in hashrate is mainly due to North American miners returning to service after the winter storm. DL News.
But the storm isn’t the only factor affecting Bitcoin’s hashrate recently.
China and Russia have recently increased regulations on Bitcoin mining, Wang said, adding that these measures have restricted Bitcoin mining operations, resulting in a decline in computing power in both countries.
In December, the Russian Ministry of Justice proposed harsh penalties for miners who extract electricity from the public grid or in areas where mining is prohibited.
Bitcoin miners who were able to stay online during the outage have been rewarded. As there are fewer miners available to compete, their relative profits will increase.