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Thursday, January 27, 2022

BTC Price: Is The Computing Power A Viable Predictor?

The hash rates used in cryptocurrency usually refer to the computing power of BTC which is heavily involved in validating different transactions on the blockchain. As Cointelegraph reports, more power would suggest far better security in the network- with an exponential interest in the profit potential of Bitcoin mining. 

Hash rate a function of BTC’s value

An increase in hash rate has often been linked with the appreciation of BTC price. Most analysts have already found proof that between the bull cycles of 2013 and 2016, there was a marked rise in the difficulty of the mining as it coincided with the increase in hash rate. A suitable example would be the 70% increase in 2021 which coincided with several large-scale investments, along with several big orders for mining equipment. 

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Yet, we can’t be entirely sure that there is a direct relationship between the installation capacity of the miners, along with the price of Bitcoin- due to certain moments of absolute dissonance. 

There is quite a connection between the price of BTC and the hash rate, but there have also been several periods where the capacity for mining has expanded in spite of the stagnation of the price of Bitcoin. This can also be attributed to the drop in hash rates, with the most recent being in October.

Nonetheless, it has no major impact on the price. Hence, it can be stated that such a metric to measure movements in short-term price could be very unreliable. This means that while there is a definite correlation between price trends and hash rates- there is not enough evidence to prove that. 

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But, it should be mentioned that there are definitely other factors which could be brought under consideration. This is especially because they bring out a much better impact on the price of BTC. The factors involve regulation, hardware for mining, geography, and others. 

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