In the past bear market, many people expected that the ‘flippening‘ would take place: a altcoin which takes the place of Bitcoin (BTC) as largest cryptocurrency would take over. That did not happen, Bitcoin is still by far the largest. Yet the hashrate has shrunk hard, and with it consumption as well.
Bitcoin hashrate and usage dropped
We can see that from the hashrate. Die is shrunk by 14% in just two weeks after the crash. The drop occurred between June 12 and 23, the exact time of the crash. Consumption has also probably decreased. According to the Cambridge Bitcoin Electricity Consumption Index consumption has decreased from about 15 gigawatts per day to about 10.5 gigawatts per day over the same period.
That is about 0.42% of total energy consumption worldwide, according to Cambridge. The university has calculated that Bitcoin needed about 93 terawatt hours (TWh) per year in 2019. That is actually relatively economical. For example, mining gold is also extremely energy-intensive, costing 131 terawatt hours (TWh) per year.
Last week it was revealed that transactions are currently sent via the banking system 56 times as much consumed† According to that research, Bitcoin is smart enough, efficient enough, and impactful enough to achieve mass adoption.
Vicious circle for bitcoin miners?
The changes in the hashrate are very important. This determines whether mass adoption can be achieved. Recently, on-chain data showed that Bitcoin miners have recently have sold† This would not only be due to the bear market, but also due to the sharply reduced profitability. Miners do their thing because they make a profit from it, but the skyrocketing energy prices mean that miners have to sell much more than usual.
In a Deep Dive we wrote last year that there is a relationship between price and hashrate. It is not clear which of the two leads exactly, but one thing is clear: if one falls, the other falls as well. A high price keeps miners operational, and miners keep the network afloat. In fact, the network cannot achieve mass adoption without the price rising along with it. So the drop in hashrate could create a vicious circle.
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