Does Bitcoin price follow hash rate? – Understanding the theory

Does Bitcoin price follow hash rate? – Understanding the theory

What is hash rate in Bitcoin ?

Does Bitcoin price follow hash rate? – Understanding the theory
CONTENT

  • Bitcoin hashrate and coin rate have a high level of correlation

  • The maximum hash rate does not always lead to an increase in the rate of the cryptocurrency

  • Bitcoin hashrate has renewed maximum 33 times in three years

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The hashrate of the most capitalized cryptocurrency – Bitcoin (BTC) – has updated its absolute maximum (ATH). According to the founder of Heisenberg Capital, a well-known trader Max Kaiser, changes may be a signal for the coin’s rate to rise. He shared this assumption with the readers of his microblog in the summer of 2019. BeInCrypto editors decided to test the viability of Max Kaiser’s theory. 

In order to understand how the bitcoin rate is correlated with the hash rate, it was necessary to analyze the behavior of the coin at those moments when the indicator updated its historical maximum. A comparison of the BTC chart with changes in the cryptocurrency hash rate over three years is as follows:

The blue line is the bitcoin hashrate. Below is a graph of the cryptocurrency rate. Charts from September 16, 2017 to September 14, 2020. Data: blockchain.com, TradingView

The chart shows 33 ATH hash rates of bitcoin. They are marked with circles. Green – growth, blue – lateral movement, red – fall. Of them:

  • In 19 episodes, the cryptocurrency rate went up.
  • In 10 cases, bitcoin lost in value.
  • In 4 episodes, the coin rate continued to move laterally.
Does Bitcoin price follow hash rate? - Understanding the theory

It turns out that over the course of three years, in 57% of cases, bitcoin went up against the background of updating the absolute maximum with a hash rate. In 30% of the ATH indicator fell on the period of the decline in the value of the cryptocurrency. The sideways, during the update of the record hash rates, accounted for about 12%.

Let’s take a closer look at 2020. By shortening the time frame, time frames can be matched more accurately. For 9 months of 2020, the bitcoin hashrate updated its maximum value 8 times. Of them:

  • In 5 cases, the cryptocurrency rate went up.
  • In 3 episodes, against the background of ATH hashrate, bitcoin lost in value.

It turns out that the coin during 2020 in 62% of cases went into growth during the periods of updating the maximum hash rate. The fall accounted for about 37%.

Does Bitcoin price follow hash rate? - Understanding the theory

Bitcoin hashrate and cryptocurrency rate charts for the year. Data: blockchain.com, TradingView

Read also: The most profitable and unprofitable cryptocurrencies in September

Does Bitcoin price follow hash rate? - Understanding the theory

It turned out that in most cases, the ATH of the bitcoin hash rate is followed by the growth of the cryptocurrency. At the same time, frequent episodes of a fall in the exchange rate of a coin, against the background of an indicator update, do not allow us to talk about the high accuracy of the theory..

Recall that most of the bitcoin hashrate is concentrated in China. At the same time, Russia is in second place. Researchers believe that the coin could press the PRC in the BTC mining market. 

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