The weekend is a good time to take the time to take it in and have to go back to the basics. In this article, we will look at what the price will be the driving force behind the increasing, but also decreasing hashrate. Then, McArdle has shared it on Twitter with a short statement about why the hashrate is left on the increases in exchange rates, while a falling stock price and the hashrate is almost instantaneous fixes.
In case it’s unclear… Price vs Hashrate charts look like this, because:
Adding hashrate in response to the bull markets take a long time cuz you have to physically deploy new hardware.
But responding to a sudden bear moves can be immediate; just hit the off switch. https://t.co/kKYeA9K2Zm pic.twitter.com/nxieFbED70
— Dan McArdle (@smooth) January 14, 2020
Contents
Why is mine?
First of all, why would people mine? For two reasons:
Some people want bitcoins without a third party is involved.
Others look at the bigger picture of bitcoin, and would like to contribute to a distributed network.
All well and good, but for the vast majority of them just want to earn some money, be it dollars, euros or the sats are.
The decision-making process in order to mine, when the stock price rises to be doubtful, the novice miners are on the line it is drawn. This is miner-to-be will benefit from an increasing bitcoin. The candidate will investigate and make the decision of which equipment to buy, and where his equipment would turn on. The question is important, as this determines the energy price.
Time difference between can and want to mine
The difference in time between the decision to proceed to mining, and the actual connection of equipment, it is of crucial importance. The price of bitcoin, it is just very volatile, and the value of the one-day-a 10% increase, and a week later it is already burning a hole in your floor to make it. The difference was, we still factor to name a few.
In the picture of the tweet shown above, which represents the blue line is the level of difficulty. The level of difficulty for mining is determined by the processing power of all of the miningapparatuur on the network. The higher the processing power (hashrate), the higher is the level of difficulty.
It is notable that the difficulty level is on the rise, even after a price correction. This indicates that the miners are more and more new machines or old machines once again cranking. These machines were most probably bought it after they decided to go to mine when the price was still rising and was.
At the moment the price is below a certain value, it emerges, is responsive to the degree of difficulty, as a sort of reflex action. Miners turn the machines off, because in mine, at that time, not in a profitable way. The profit is determined by the cost of the hardware, and the amount of energy that is needed in order to be able to mine. Energy costs are also variable and, therefore, the equation for everyone else.
Excited to start
If you have a gemined, but it still wants to start, and then the period of time between the decision-making process, and it really is mine) in length. Once you have a lot of time and money you have invested in the research of the energy consumption and the actual purchase of the hardware, you can rest assured that your machines will connect to it. Even though the course is equally on the decline. It is, therefore, a long journey in advance, before the new miners join the network. And the journey begins, and almost always during the excitement of a rising share price.
But, in the end, after the enthusiasm which has been going since the share price continues to fall, it seems common sense to prevail too. The turning off of the equipment, it is quite obvious if you can save money. And, as Dan says, you can get your equipment in less than a second to switch it off.
Death spirals do not exist
This is also an argument against the so-called mining of the ” death spirals: the fear is that the hashrate is completely, even to the point that the price might be for a longer time in the decline. Which are not taken into account is that, at that time, a lot of new miners are in the middle of the process of getting their hardware to be connected to a place, where energy costs are low.
In short, the hashrate is important and in next to no time can be reduced if the miners decide to keep it off. However, it is much more difficult to predict how much computing power is still in the pipeline.