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The fundamentals of the Bitcoin (BTC) network are not reflecting the bearish price trends observed this week.
Recent on-chain data indicates that mining difficulty has reached unprecedented levels, with hash rate closely following suit.
Bitcoin mining difficulty concludes decline
Although BTC/USD experienced a 10% decline last week, Bitcoin miners seem to be managing the price drop effectively.
This was reinforced by network activity on August 22, when difficulty rose by 6.17% during its latest biweekly automated adjustment.
This increase not only set new all-time highs for difficulty but also represented Bitcoin’s sixth-largest difficulty rise of 2023, according to data from monitoring service BTC.com.
Difficulty serves as an indicator of miner competition and the security of the Bitcoin network, and its upward trend implies that miners are still maintaining profitability.
The upcoming automated adjustment is expected to continue this trend, pushing difficulty beyond 56 trillion for the first time.
Bitcoin network fundamentals overview (screenshot). Source: BTC.com
Hash rate indicates “high confidence” in BTC
A similar narrative applies to hash rate — the estimated hashing power utilized by miners on the Bitcoin blockchain.
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While precise calculations are challenging, depending on the source, hash rate is already approaching previous all-time highs of over 400 exahashes per second (EH/s).
In response to the data, MAC_D, a contributor to the on-chain analytics platform CryptoQuant, noted “high confidence in the security and reliability” among participants in the network for both Bitcoin and the leading altcoin Ether (ETH).
“Recently, the prices of BTC and ETH have decreased by -10%. However, the network security and reliability have improved. First, the BTC hashrate (SMA 14) shows higher values during the decline, indicating that miners are more engaged in BTC mining. Second, the ETH staking rate (%) reveals that more ETH has been staked despite the price drop,” he stated in a Quicktake market update on August 22.
“This suggests that investors have strong confidence in the security and reliability of the BTC and ETH networks. The decline in price, despite the increase in the intrinsic value of both assets, indicates that they are undervalued, and it may be seen as an opportunity to actively accumulate assets.”
Bitcoin estimated hash rate chart. Source: Glassnode
Additional data from on-chain analytics firm Glassnode reveals minimal significant change in the quantity of BTC held by mining entities.
This figure stood at just over 1.83 million BTC as of August 22, reflecting a steady increase of 0.08% since the beginning of the month.
Bitcoin miner BTC balance chart. Source: Glassnode
This article does not provide investment advice or recommendations. Every investment and trading decision carries risk, and readers should perform their own research before making any decisions.
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