As the cryptocurrency bear market presses on many investors worry that Bitcoin was just another passing fad. Bitcoin recently broke down past $8000 and is struggling to find support around $7800, the same level where Bitcoin broke out in early April in an attempt to break above $10000. The overall market capitalization is also in a steady decline breaking $400 billion from its all-time highs of over $830 billion.
The market capitalization has been nearly cut in half resulting in major price declines in Bitcoin and nearly every Altcoin on the market. Aside from the declines in price action and market capitalization, there is one area where we are seeing growth and that is in hash rate . This may lead us to believe that miners know something we don’t.
Looking at the chart on Blockchain.info, we see a very steady increase in hash rate during the months leading up to and after the market sell-off. Looking at a chart of the total cryptocurrency market capitalization and hash rate side by side will show a clear divergence. Why is it that hash rate is increasing while prices are still in a continuing decline?
It is a fact that as more miners join the network, the higher the network hash rate is. This tells us that even though Bitcoin prices are falling at a steady pace, miners are still very much interested in mining Bitcoin.
From the data presented we can draw the conclusion that the overall outlook on Bitcoin is bullish, at least in the eyes of the miners. After all, miners would not want to allocate their resources mining a digital asset they believe to be worthless. Miners are in the business to make money and perhaps the downturn in this market will allow them to accumulate more bitcoin at lower prices in preparation for the next Bull Run.
Many traders focus only on the technical outlook and can overlook solid fundamentals and clues such as an increasing hash rate. If the hash rate were to be falling in congruence with price, then there would be cause for concern. That would tell us that miners are less interested in mining Bitcoin and could be turning their focus to mining other cryptocurrencies or not mining at all. It seems to me that miners are taking a longer-term view on Bitcoin and cryptocurrencies, ignoring short-term downtrends in the market. This fact alone should give investors confidence that there is still a lot of interest in Bitcoin and in mining specifically. Network support is very strong and should continue to grow.
Miners are arguably the most important asset to the Bitcoin ecosystem because they work to create new blocks as well as verify all transactions to ensure the network is secure. A strong group of miners who are willing to support the network creates the image that Bitcoin is very strong and well positioned going forward. As we move closer to the end of Q2 and into Q3 fundamentals will continue to improve and my bet is that price action will surely catch up to the strong fundamentals. Without a strong group of miners to support the network, Bitcoin would surely be headed for a grim future. That is not the case judging by the data. Miners are still bullish long term as are we.
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