But there is nothing wrong with it fundamentally
According to on-chain data from provider CryptoQuant, Bitcoin’s 56% drop from the all-time high was followed by a steady rise in hashrate on the network, which could be a worrying sign for investors.
Unhealthy rise in supply
The drawdown of Bitcoin is not something the crypto market should be afraid of as the volatile nature of digital assets implies active movement in short periods of time, but the hashrate of the BTC network should follow the price, which is not the case during this correction.
The rise in hashrate is followed by the rise in concentrated supply in the hands of Bitcoin miners. Despite relatively low payout rates, miner funds will inevitably be realized as there is still a need to cover initial mining expenses, including rig depreciation and electricity payments.
With a larger concentration of BTC in miners’ wallets, the market may see greater selling pressure in the future. With the price of Bitcoin plunging, the appearance of unexpected selling pressure will push the market even further down, creating additional losses.
Positive side of the rise in hashrate
But while the rising hashrate could be a worrying sign for traders and investors in the short to medium term, Bitcoin fundamentalists only see positivity from a divergence between the two metrics.
As the interest of Bitcoin miners remains on a relatively high level, it may indicate the fundamental growth of BTC as a store of value rather than a speculative asset. Previously, U.Today reported that the mining of Bitcoin is unprofitable after a drop below $32,700.
At press time, Bitcoin is consolidating around $30,000 in the past two weeks after losing 25% of its value in three days.
