Bitcoin prices fell to just over $ 3,500 in March, thanks in part to the COVID-19 epidemic and the upcoming May halving event, which will reduce the amount of new Bitcoin rewarded per block from 12.5 coins to just 6.25 coins. And yet, since then, the price has done almost nothing, just rise. At the time of writing, the price of Bitcoin is around $ 7,000.
While it would be easy to suggest that the drop in prices last month was solely due to the epidemic, it was clearly not the only reason. It may also be not just the fact that investors are pricing and the impact of an upcoming halving event. Changes in the extraction ratio may also be part of this.
What is the hash ratio?
The block chain network extraction rate refers to the rate at which blocks of transactions can be grouped, while cryptographic puzzles are resolved to validate transactions and converted to hashes (or strings that represent a particular transaction). If the extraction rate is low, it means that the network is moving slowly during transactions and cryptographers are solving puzzles at high speed, meaning they have to wait longer for their rewards.
If a component has to wait longer to make money, it makes sense that their profit margins are probably not that high. Since March 21, the hash rate has expanded and increased by 10% since the sharp fall in Bitcoin prices. That’s a pretty big increase in no time!
How does the hash exchange rate affect the price of Bitcoin?
The increase in the extraction rate is partly due to a decrease in the difficulty of solving cryptographic tasks on a blockchain. The higher the number of statements per second, the more implied the force is to drive the network forward and validate transactions.
Then it makes sense that increasing the hash rate would make the difficulty even harder and allow miners to move faster by validating transactions, which again makes their efforts more profitable.
How long the perceived difficulty of validating transactions varies based on a number of factors, including how many transactions go into the Bitcoin network at a given time, how many nodes are involved in authenticating those transactions, how much force they have to contribute to the network, and of course anything on a larger farm or in relation to a coronavirus epidemic.
So the rise in the price of bitcoin is because more transactions are justified and the stability of the network is proven again. This difficulty is likely to change in a few days and the price is likely to drop after the last bull run.
Why do economic uncertainty and COVID-19 prove the value of Bitcoin?
The most important consideration to consider around Bitcoin, at all events in the world, is that while governments are pumping stimulus packages and subsidies to citizens to keep the economy afloat, governments ultimately expect this money to somehow return to the economy. economy.
The problem is that not everyone returns at the same speed or with the same force. There will be gaps. There are people who are currently being laid off and who will no longer have jobs when it is over, and there are debts to be accounted for that are not necessarily paid off, even if the trillions of dollars are given to both companies by individuals during this time.
In contrast, the Bitcoin network, which certainly has to deal with fluctuations, but cannot be falsified or copied even in times of uncertainty. Everything about Bitcoin demand and demand moves algorithmically. While market-investing whales can certainly manipulate price, the long-term value of the blockchain is what sustains Bitcoin and other digital currencies in these times. For years, this current dose of uncertainty could be what takes Bitcoin to a whole new level, allowing digital currencies to continue to slowly take over world power while still being ignored by most skillful investors and economists on the planet. its value.