Bitcoin’s hashrate seems to have made a full recovery, returning to the index value it occupied at the beginning of the month. This follows a period of incredible expansions and all-time records. This dramatic oscillation provides a glimpse into the recent tumultuous world of Bitcoin mining and what drives changed miner actions.

During the first third of that, the Bitcoin network’s hashrate skyrocketed. For PoW blockchains, it is most commonly measured in hashes per second (H/s). This dramatic increase contributed to the hashrate reaching a new ATH, a testament to the increased mining market activity and investment in ASIC miners. Since early 2011, bitcoin’s virtual currency value has increased approximately 1500 percent! For this reason, units such as terahashes per second (TH/s) are now commonly used to express the hashrate. Since its all-time high, the hashrate climb has stalled out. Over the course of the last week, this pattern flipped on its head, producing a sharp and nasty pullback.

Hashrate and Mining Difficulty

In the face of evolving economic pressures, the hashrate trend is directly signaling miner sentiment and activity on the Bitcoin network. This was a stark contrast to earlier this month when the hashrate went upward aggressively. Consequently, the network kept increasing its mining difficulty, reaching an all-time high.

Bitcoin difficulty adjusts about every two weeks or so in order to keep an average block creation time at 10 minutes. When the Bitcoin network’s hashrate goes up, the difficulty adjusts. This change prevents new blocks from being mined too fast.

In the last year, the Bitcoin hashrate 7-day average has been very volatile. This change is representative of both changes in mining profitability and miners’ participation rates. These swings can be affected by everything from the price of Bitcoin, the price of energy, or simply the availability of mining hardware.

Miner Economics and the Block Subsidy

Miners mainly make money from the block subsidy, which is issued according to a relatively fixed schedule. The purpose of this subsidy is to ensure a steady BTC value. That flips on its head during Halvings, which occur approximately every four years and forever halve the block subsidy. Halving events have a large impact on miner revenue. Consequently, when faced with persistent declines in rewards, miners tend to move their hashrate around to compensate.

The recent increase in Bitcoin difficulty may have proven challenging for some miners, particularly those with less efficient equipment or higher operating costs. Mining is becoming more competitive and only the most efficient operations will be able to continue turning a profit.

Recent Hashrate Pullback

The Bitcoin hashrate recently suffered its biggest drop of all time. This indicates that other miners have given up their business or they’ve reduced their mining capacity. A few things may be going on here. Another factor – growing difficulty, escalating energy expenses, and the recent Bitcoin price crash could all play a part.

The reduction in hashrate can lead to a decrease in mining difficulty in the next adjustment, potentially making it more profitable for remaining miners. This worrisome state of affairs puts the security of the Bitcoin network at risk. If only a handful of entities ever control a majority of the hashrate, it’s a death knell to decentralization.