On-chain data shows that Bitcoin mining hashrate continues to decline, while the price of the cryptocurrency itself has taken a hit.

Average Bitcoin Mining Hashrate Down Over 8% Over 7 Days From All-Time High

The “mining hashrate” refers to an indicator that tracks the total amount of computing power that miners currently have connected to the Bitcoin blockchain. This metric is generally considered to represent the current state of BTC miners.

When the indicator value increases, it means that new miners are joining the network and/or old miners are expanding their facilities. Such a trend implies that the chain seems attractive to these chain validators.

On the other hand, a drop in the metric indicates that some miners have decided to disconnect from the network, possibly because they no longer find BTC mining profitable.

Below is a chart showing the trend in the average Bitcoin mining hashrate over 7 days over the past year:

Looks like the 7-day average value of the metric has gone through a decline in recent days | Source: Blockchain.com

As can be seen in the chart above, the 7-day average Bitcoin mining hashrate had risen to a new all-time high (ATH) towards the end of last month, but has been in a steady decline since then.

The ATH occurred when the BTC price was rising and the decline in the metric coincided with a period of bearish momentum for the cryptocurrency. The reason behind this close relationship is the fact that miner revenue is strongly linked to the asset’s price.

These chain validators generate their revenue from two sources: transaction fees and block subsidy. Historically, however, the latter has been the most important source of revenue.

The block subsidy, which miners receive as compensation for solving blocks on the network, is issued at a fixed BTC value and also at a more or less fixed time interval. This means that the only variable involved is the USD price of the cryptocurrency.

As the asset’s value increases, so do these rewards, and therefore the miner’s income. As such, miners follow the coin’s price when it comes to adding or removing hashrate.

Interestingly, while Bitcoin had previously recovered above the $62,000 level, the hashrate did not see a reversal, perhaps because miners did not think the rise would last. Perhaps they were right, as the asset has reversed some of its recovery over the past day.

One consequence of the continued decline in mining hashrate is that the network will undergo a negative difficulty change at the next scheduled adjustment.

The next estimated change in the BTC mining difficulty | Source: CoinWarz

The difficulty is a feature of the Bitcoin blockchain that determines how difficult miners find it to mine on the network. The existence of the difficulty is what ensures that the block subsidy is given out at fixed intervals.

As miners add hashrate, they naturally become faster at mining and thus produce blocks faster. To counteract this, the network increases the difficulty just enough to slow miners down to the default speed of 10 minutes per block.

Because miners have been lowering their hashrate lately, the block time is slower than usual. The Bitcoin blockchain will now lower the difficulty by over 4% to make it easier for validators.

BTC price

At the time of writing, the Bitcoin price is trading at around $59,700, up over 19% over the past week.

The price of the asset appears to have gone down over the last day or so | Source: BTCUSD on TradingView

Main image from Dall-E, Blockchain.com, chart from TradingView.com