Bitcoin hasn’t had the best of weeks. Since Sunday, the cryptocurrency has fallen in price by more than 20%. Due to the sudden nature of this move, investors sought to figure out potential catalysts.
As reported by Blockonomi, Joe DiPasquale, the CEO of BitBull Capital, looked to the lackluster launch of Bakkt coupled with a rapid drop in Bitcoin’s hash rate, which saw the metric fall from just shy of 100 exahashes per second to 67 in a spectacular fashion.
According to one analyst, however, the correlation drawn between the hash rate and Bitcoin’s day-to-day value is categorically wrong. What’s more, he suggests that the Bitcoin “hashcrash”, as some have dubbed the seeming collapse in the Bitcoin mining ecosystem, may have never taken place.
Bitcoin Hashcrash Never Happened
When nearly half of Bitcoin’s hash rate — a metric used to describe the level of computational power backing the network and processing BTC transactions — seemingly disappeared overnight, investors were quick to express their concerns on online forums.
Cornell University professor Emin Gün Sirer noted that this trend looks “very unhealthy”, before going on to bash the seeming shortcomings of Bitcoin’s Proof of Work system and its relation to exchange security.
Bitcoin hashrate down by 30%. Anyone know why? Looks very unhealthy.https://t.co/WADNwZ76ui
— Emin Gün Sirer (@el33th4xor) September 24, 2019
Others simply pointed to the fact that if the metric was real, it meant that a massive amount of cryptocurrency mining infrastructure — farms worth dozens of millions of dollars — were suddenly shut down, implying a decrease in interest in BTC.
Trade publications quickly picked up on this story, spreading a sense of uncertainty throughout the industry.
However, Sasha Fleyshman, a trader at crypto investment firm Arca, recently came out to remark that this flash crash in Bitcoin’s hash rate is likely a misnomer. He broke down his findings and analysis of the odd debacle in an extensive Twitter thread, which he summed up as a way to debunk the “FUD fuel” that was the hashcrash.
Remember the other day when everyone was kicking and screaming about a "40% drop in $BTC hash rate"?
Many don't understand how hash rate is determined, as well as not understanding the implications of a 40% intraday drop.
TL;DR the drop most likely never happened, FUD fuel 1/ pic.twitter.com/d7i2iGb2QX
— Sasha Fleyshman (@ArcaChemist) September 26, 2019
Firstly, he noted that there is unlikely one mining farm or entity that has access to 40% of the network, let alone enough access to shutdown thousands of mining machines for an entire day. And even if one entity had such leverage, what would be the point?
To lose tens of thousands of dollars worth of potential profits, to stave off a large mining difficulty adjustment, or to slow down block times for a few days? No, likely not.
Fleyshman then explained that the way in which hash rate is calculated by many metric providers is inherently susceptible to anomalies, which is a byproduct of Bitcoin not inherently calculating the extent of the computational power securing its network.
The Arca trader made reference to a Twitter thread by the founder of blockchain startup Summa, which outlined that an irregular 18-minute block is likely the anomaly behind the -35% reading for Bitcoin’s hash rate on some metrics providers.
He suggested that due to the way in which Bitcoin’s hash rate is estimated, a single 18-minute block may have had an outsized effect on the calculations, leading to the harrowing reading.
While the steep dropoff in Bitcoin mining activity shocked investors, all is now well. The hash rate of the leading blockchain network is now edging closer to 100 exahashes per second once again, and is, according to Hans Hauge of Ikigai, a key sign that Bitcoin is fundamentally stronger than ever and not in a bear market.
Ok, let's check the hash rate. Maybe the miners quit mining or something? No, actually that's at an all-time high as well. pic.twitter.com/Vx3Ao4sUNP
— Hans HODL (@hansthered) September 26, 2019