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The newest Glassnode report focuses on the subject of the day: bitcoin mining. While bitcoin’s value has been suspiciously flat for some time, the problem adjustment got here in and registered an all-time excessive. Do the miners know one thing we don’t? Or is there a switch of energy happening behind the scenes? Glassnode poses a working idea on their latest The Week On-Chain. To start with, Glassnode places the problem adjustment into perspective:

“Bitcoin hashrate has reached a new all-time-high of 242 Exahash per second. To give an analogy for scale, this is equivalent to all 7.753 Billion people on earth, each completing a SHA-256 hash calculation approximately 30 Billion times every second.”

The factor is, we’re in a bear market. The sentiment is fearful. There’s bother brewing all over the place on the earth and bitcoin has been boring for some time now. What might be the rationale for a hashrate all-time excessive? Is it, as Glassnode theorizes, “a new dynamic as more of the hashpower is held by better capitalised publicly traded mining companies”? Or is it simply the sport idea behind bitcoin at work? Remember that mining income can be down and the associated fee to supply one bitcoin goes up in tandem with electrical energy costs. 

Making the state of affairs extra unstable, the miner income’s bitcoin is at a low level. This “should, in theory, create elevated income stress on the mining industry.” Add bitcoin’s secure costs to that equation and, what do we’ve? “It is extremely rare for BTC prices to stay so stationary for long, suggesting heightened probabilities of volatility on the horizon.”

Bitcoin Hashrate All-Time High | Source: The Week On-Chain

Bullish Signal: Bitcoin Hash-Ribbons Unwind

According to Glassnode, “the Bitcoin hash-ribbons commenced an unwind in late August, providing an indication that mining conditions were improving, and hashrate was coming back online.” What does this imply and why is it bullish, although? “Almost all historical hash-ribbon unwinds have preceded greener pastures in the months that followed.”

According to Glassnode, since bitcoin’s value continues to be flatlining, the “hashrate rise is due to more efficient mining hardware coming online and/or miners with superior balance sheets having a larger share of the hashpower network.” That’s the bottom of Glassnode’s takeover idea.

Glassnode Proposes “The Mining Halving” Concept

Another of their wild theories, Glassnode poses that “a 66% increase in Difficulty and Hashrate since Oct-2020 corresponds to an approximate halving in revenue per hash.” And to help that, they supply these numbers: “the revenue earned per Exahash has been in a persistent and long-term downtrend, with the BTC-denominated reward currently at an all-time-low of 4.06 BTC per EH per day.”

So, if miners are getting destroyed by market circumstances, why is the hashrate recording all-time highs? The reply may lie with the Puell Multiple, “which is a cyclical oscillator that compares the current daily mining revenue to their yearly average.” According to this indicator, the mining enterprise is definitely gaining floor in opposition to earlier efficiency. 

“The Puell Multiple hit the current lows of around 0.33 in June, indicating that miners were earning just 33% of their yearly average revenue. It has since recovered to around 0.63, implying a degree of stress relief, and adjustment to this new pricing regime.” According to Glassnode, this reduction may imply that “a true bear market low is established.”

BTC value chart for 10/11/2022 on Bitstamp | Source: BTC/USD on TradingView.com

Glassnode Thinks There’s Still Capitulation Risk

Let’s be clear, bitcoin is strolling a tightrope in the intervening time. The market is about to interrupt and the pendulum may swing both method. Even although there are causes to be optimistic, the sensible investor ought to put together for the worst. “By numerous models, we estimate that the average cost of BTC production hovers just below current prices, such that any significant price decline could turn an implied income stress, into acute and explicit stress.”

To assess the chance, Glassnode decided “the aggregate size of miner balances” to 78.4K BTC. The homeowners of these reserves “may come under income stress,” however “It is extremely unlikely this full amount would be distributed.”

And that’s the place we stand in the intervening time.

Featured Image by Icons8_team from Pixabay | Charts by TradingView and The Week On-Chain