Following China’s ban on cryptocurrency mining, data from on-chain analytics service Glassnode shows that Bitcoin’s hash rate has nearly fully recovered from a 50% drop in May.
The hash rate is a metric for measuring a Proof-of-Work network’s overall computing capacity.
Following the most severe short-term disruption in the history of the Bitcoin network earlier this year, the recovery has forced Chinese Bitcoin miners to relocate their operations overseas.
The mining difficulty is an on-chain indicator used to measure hash rate performance, according to the report. The report states that
“After bottoming out in late July, protocol mining difficulty has risen by 39%, with a further additional upwards adjustment of around 3.9% expected this week. Mining difficulty has now returned to last 2020 levels, requiring around 80 sextillion hashes to solve a block (that is 8 followed by 22 zeros!).”
Another on-chain metric, the difficulty ribbon is also used to illustrate the hash rate recovery. The report states that,
“The Difficulty ribbon is also about to flip over and signal full recovery, as the slowest 200-day moving average crosses over the fastest 9-day moving average. The only comparable difficulty ribbon flip to the current market was following the December 2018 bear market capitulation event that took prices down 50% to $3k.”
The report also looked at the total miner’s revenue on-chain metric to assess how profitable mining is at current hash rate levels. The report stated that, “we can look to miner total revenues to assess overall income for the mining industry. Despite a 50% reduction in the block-subsidy from 12.5 BTC/block to 6.25 BTC/block in May 2020, total USD miner revenue is up significantly.
“Remember, miners have CAPEX (hardware, facilities, logistics) and OPEX (power, personnel, maintenance etc) costs that are denominated in fiat currencies. Comparing the current aggregate mining income of $40M per day to revenues observed around the 2020 halving event, we can see that miner revenues are up; +275% since the pre-halving period of $14M to $18M/day and +630% compared to the post-halving period of $6M to $8M/day.”
The hash rate recovery means that miners will be using more computing power to mine bitcoin. It also means that the computing power required to maintain the network is on the pathway to return to the level before the China ban on cryptocurrencies. The return in hash rate also means that bitcoin’s network integrity is very strong and almost unsusceptible to attacks.