Can Bitcoin hash rate predict the price?

Hash rate refers to the total computing power spent verifying transactions on the Bitcoin blockchain network. Its high computing power also increases network security and raises interest in the profitability of Bitcoin mining.

Does the hash rate show Bitcoin’s value?

The increase in hash rate is often associated with anticipation of a rise in BTC price. Analysts found that mining difficulty also increased after the hash rate in both 2013 and 2016 bull markets.

For example, the 70 percent increase in 2021 was accompanied by investments in mining equipment and large orders. However, it is almost impossible to determine the cause and effect of this.

On the other hand, there were times when there was a mismatch between the two, so there might not be a direct relationship between the Bitcoin price and mining capacity.

While it’s impossible to measure exactly, the average seven-day hash rate is better at detecting trend changes.

Bitcoin hash rate, TH / s (left) and BTC price, USD (right). Source: Coinmetrics

2017 was a prominent year in which the BTC price showed parabolic growth. The hash rate tripled in August of the same year to 6.8 TH / s. But the theory that the hahs rate could predict price was weakened by a 25 percent sudden drop in computing power with no apparent effect on price.

On the other hand, the 132 percent increase in Bitcoin in the last two months of 2017 was reflected in the hash rate only a few months later. The hash rate doubled between December 2017 and March 2018.

Bitcoin hash rate, TH / s (left) and BTC price, USD (right). Source: Coinmetrics

The second half of 2018 and 2019, when the BTC price showed stronger movements and sometimes pauses, offer more interesting data. The hash rate doubled between April and November 2018 to 54 TH / s. Immediately after this peak, BTC made a sharp correction and fell to $ 4,000.

On the other hand, both indicators dipped in mid-December 2018, and in the first half of 2019, there was a simultaneous movement in both the BTC price and the hash rate.

Bitcoin hash rate, TH / s (left) and BTC price, USD (right). Source: Coinmetrics

In the second half of 2019, a completely opposite trend was observed and the hash rate increased by 66 percent, while BTC fell 38 percent. The BTC price this time peaked at $ 10,200 in mid-February 2020, while the hash rate price followed only three weeks later.

Bitcoin hash rate and price at record levels

Current data also show a strong correlation between the two measures. The hash rate, which peaked at 166 TH / s on February 8, is reflected in the price two weeks later, with BTC reaching $ 55,000.

Bitcoin hash rate, TH / s (left) and BTC price, USD (right). Source: Coinmetrics

Therefore, it can be said that there is undoubtedly a strong correlation between hash rate and price.

The opinions and views expressed herein are those of the author alone and do not reflect the views of Cointelegraph. Every investment involves risk. Do your own research before making a decision.

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