Bitcoin prices have rebounded strongly in the past week or so, compared with the lows set during the sell-off caused by extreme panic earlier this month, and the market value has recovered by almost 50%.
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With the rise in prices, some Bitcoin miners have begun to return to the market and continue to mine, as evidenced by the small rise in hashrate (hash rate) across the entire network.
Network computing power recovers after deadly panic selling
Bitcoin is a unique financial asset because it represents the value of the entire distributed blockchain network and is maintained through a process called proof of work. The miner solves complex mathematical equations to prove that the transaction verification work has been completed, so as to obtain the bitcoin released by the block as a return on the previous effort and production costs.
The goal of the miner is to produce bitcoin at a production cost well below the price and thus make a profit.
However, when the price of bitcoin reaches its lowest point, miners usually surrender, either shutting down the mines they operate or simply shutting down their machines until the price of bitcoin rebounds.
During the recent panic selling caused by a coronavirus pandemic, the first cryptocurrency in history fell from $ 10,000 to less than $ 4,000 in a matter of weeks.
The slump has caused many miners to shut down their machines, as evidenced by the sharp drop in the hash rate of the cryptocurrency network.
Bitcoin hash rate is increasing, although some backward mining businesses surrendered when Bitcoin price reached $ 5,000
The miner just shut down the machine and waited for the price of bitcoin to rise so that the price of the coin allowed mining again.
— Rekt Capital March 24, 2020
However, as the price of bitcoin has rebounded strongly enough, some larger bitcoin mining businesses can already cover the initial investment return on energy costs, and the computing power of the entire network has begun to rise.
Despite price rebound, Bitcoin price continues to be below average production cost
As far as bitcoin mining is concerned, it has the characteristics of survival of the fittest. When the price of bitcoin drops to such a low level, only miners with the lowest energy costs and the highest operating efficiency can withstand such a large risk.
Although the hash rate of the entire network does show signs of recovery, the price of Bitcoin is still lower than the production cost of most small miners, and they are more willing to directly from the exchange than to run expensive and energy-consuming rigs directly at the mine Buy cryptocurrency.
The recovery of the hash rate is a relatively positive signal. What is worrying is that as smaller miners leave the market, the computing power behind the Bitcoin blockchain will become more and more concentrated, and only the most efficient miners control the largest share of the network, essentially destroying The value of assets as a distributed network.
If anyone wants to take this opportunity to exploit the loopholes in the protocol, any single entity that gets most of the network's computing power can have a devastating effect on Bitcoin.