Bitcoin Building on New Highs: From Hashrate to Miner Revenue
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The price of the flagship cryptocurrency Bitcoin has been steadily rising over the last few months, going from little over $11K in October 2020 to a new $52K all-time high in February. Corporate adoption is widely believed to have been behind BTC’s astonishing price rise.
In October 2020, PayPal started letting users buy, sell and hold Bitcoin, as well as BCH, ETH and LTC, and the price started rising. As it rose, companies like MassMutual, Ruffer Investment, MicroStrategy, Square and others started adding Bitcoin to their treasuries, helping it surpass $40K.
After Tesla announced it invested $1.5 billion into Bitcoin and was planning on accepting BTC payments in the future, the price of the cryptocurrency got another push that helped it go over the $50K mark. Institutional investor interest, as well as retail interest, has been growing since.
These are not, however, the only metrics that have been improving for the cryptocurrency. A look at the data shows us that several other metrics are worth looking into as BTC’s fundamentals grow stronger.
Bitcoin’s hashrate hits new high
As the price of Bitcoin kept on rising, miners seemingly bet more on mining equipment and added more hashrate to the network. Bitcoin’s hashrate has hit a new all-time high over 160 million TH/s, and while it has since dropped slightly, these fluctuations are quite common over randomness in block discovery.
The network’s hashrate is a key security metric, as it shows how much computing power is behind it. The bigger the hashrate, the harder it is to attack the blockchain and manipulate it in order to, for example, double-spend funds.
While the Bitcoin network has never suffered such an attack, its growing hashrate means it’s increasingly more unlikely it will ever suffer such an attack. Several altcoins have seen their hashrate get overwhelmed and what ensued were double-spends, often of millions of dollars worth of tokens.
Miner revenue hits new high
Bitcoin’s rising hashrate essentially shows that miners are betting more on the cryptocurrency’s network, partly because returns have grown exponentially with the rise in price and in transaction fees being paid, as fees are now close to averaging 1 BTC per block.
This means BTC miners’ revenues have grown exponentially over the last few months to hit a new all-time high, according to data from Blockchain.com.
The figure is bullish, as it shows the incentive miners have to keep betting on Bitcoin and further secure the cryptocurrency’s network.
Transaction fees keep climbing
Data shows that the average fee paid to move funds on the Bitcoin network has been steadily climbing, along with the cryptocurrency’s price, now standing at an average of $22.70 per transaction. The fee, it’s worth noting, is measured in USD, which means it has to inevitably climb along with its price.
Data from BitInfoCharts shows the average transaction fee is still far from the all-time high above $50 seen back in December 2017.
The Bitcoin network has received several improvements since 2017. While the layer-2 scaling solution Lightning Network (LN) is already being used, it has also added technical improvements, including Segregated Witness (SegWit), which have helped increase the number of transactions in each block.
Speaking to Decrypt Pedro Febrero, an analyst at Quantum Economics, said high transaction fees are an “excellent sign,” as it shows adoption is growing with increasing competition to add transactions into blocks. He added that high fees may scare away buyers with less cash and pointed to technical solutions being worked on, including the LN.
Unique addresses close in
The December 2017 rally that saw Bitcoin hit a high near $20K was largely driven by retail investors in a bubble that formed over the initial coin offering (ICO) mania. It saw unique addresses on the blockchain peak near one million per day.
Data shows, however, that even throughout the bear market the number of unique addresses kept on growing after an initial crash, and it’s now closing in on a new high once again, despite a significant lack of interest from retail investors feeling fear of missing out when compared to late 2017.
It’s worth pointing out that the number of unique addresses does not show the total number of Bitcoin users. One user can create thousands of addresses, which could inflate the number, but services such as exchanges can use one address to hold the funds of thousands of users.
Jay Hao is a tech veteran and seasoned industry leader. Prior to OKEx, he focused on blockchain-driven applications for live video streaming and mobile gaming. Before tapping into the blockchain industry, he already had 21 years of solid experience in the semiconductor industry. He is also a recognized leader with successful experiences in product management. As CEO of OKEx and a firm believer in blockchain, Jay foresees that the technology will eliminate transaction barriers, elevate efficiency and eventually make a substantial impact on the global economy.
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