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Stats from Coin.Dance showed hash rate on the BTC blockchain rebounded from its March dip as the price of the BTC token climbed back into positive territory for block miners. Many BTC maximalist and hardcore proponents are pointing to this as a sign of the network’s resiliency. Others are pointing to insiders executing a coordinated pump and dump.

What role did BTC miners play in this retreat back into positive price territory? It’s an interesting question to consider. 

Many believe that hash rate is in effect the price floor being set by the network. Did the miner’s hash rate return cause the price of the digital currency to climb, or was the hash rate returning a by-product of the price increasing?  

This causality is a crucial distinction to note as we quickly approach the BTC halving. If price follows hash rate as they say, the market price of BTC is on a collision course with another downturn once the halving transpires.  

Why would hash rate suddenly decline after it’s been growing exponentially as better ASIC servers continue flooding the market? 

Much of the network computing power remains generated by older generation models. Barring a miraculous and significant price spike, these earlier models will soon become economically obsolete once the lowest profitability point for BTC block reward mining doubles in slightly over two weeks. 

A significant number of BTC nodes will not continue operating under the current market condition. There will be some consolidation between competing groups, while others will shut down operations entirely. BTC block reward mining is a hodgepodge of massive server farms and smaller individuals operating dozens of servers within a pool. 

What happens afterward within the market could mirror March’s dramatic downturn.  

If miners truly help play the role of the market maker through the hash rate they contribute to the BTC network, a pullback in support should correlate into a decrease in price. The signal that would send to the community might further exacerbate a downward price spiral. 

Hash is like a gas that fills a room which is sized by the significantly manipulated market price—that is the only relationship between the two. Price manipulated up and more hash, price manipulated down or slammed down in a halving and hash drops to profitability. And since price is speculative and manipulated and because the halving reduces by an amount that is statistically insignificant to the overall market, the halving will do nothing but wipe out half the miners and cause a major correction in other areas.

I don’t personally believe that price follows hash rate as closely as some would have you find. It sounds too much like the tail wagging the dog. Many have also accused BTC miners and crypto hedge funds of manipulating the market in the past. For them, BTC represents their generation’s version of digital gold, not cash

If true, then that explains price following hash power in a more nuanced way as miners would seek to position themselves to reap the reward after artificially inflating the price. 

In a genuinely free market, while there is a relation between hash rate and market price, utility, and demand at scale ultimately determine the value of any asset. Hash rate is more an indicator of the enthusiasm within the competition since the difficulty algorithm offsets production cost.

 Does this mean that heading into the halving BTC is a sucker’s bet since it lacks utility and demands has peaked? Absolutely. 

Luckily we do not have to wait long to see how these different scenarios will unfold. BTC is a risky asset that has the potential to appreciate in value similar to a Ponzi scheme. Its cultish community has long since abandoned its roles providing oversight or acting as a watchdog to the BTC mining community. 

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