Janice R. Andrews
A divergence between Bitcoin’s price and its hashrate may be setting the stage for a potential rally, based on historical data. This divergence has started to emerge, raising speculation that Bitcoin’s value could see a significant upward movement soon.
The Emerging Divergence
The divergence between Bitcoin’s price and its hashrate — the total computing power of its network — has been a key indicator in the past of potential price rallies. Historically, such divergences have occurred only a few times, but they have often marked local price bottoms, followed by a rally as the market catches up to the rising hashrate.
In recent weeks, this pattern has resurfaced. Bitcoin’s price has already shown signs of recovery, gaining about $9,000 since its local low on September 6. This marks a 15% increase in value, with Bitcoin trading around $54,000. Meanwhile, the Bitcoin network’s hashrate has reached an all-time high, surpassing 693 exahashes per second (EH/s) on a seven-day moving average. This increase in computing power coincides with Bitcoin’s price lagging behind, setting up the potential for a rally.
Mining Activity and Market Share Growth
A major driver behind the recent surge in hashrate is the activity of publicly traded Bitcoin mining companies. These companies have significantly increased their computing power since the last Bitcoin halving, which reduced the rewards miners receive for validating transactions. The halving initially caused a drop in the hashrate, as less efficient miners exited the market. However, well-capitalized, publicly traded miners have stepped in, raising their hashrate and capturing a larger market share.
Data from TheMinerMag shows that publicly traded miners now hold nearly a 23% market share in Bitcoin production, the highest level since January 2023. This increase in dominance is expected to continue, as these companies compete to remain profitable despite the reduced mining rewards post-halving.
By increasing their market share and computing power, these miners have also started to accumulate Bitcoin, which could further influence the market. With fewer bitcoins being sold, the supply available to the market decreases, potentially driving up prices.
Counter-Seasonal Price Trends in September
September has historically been a bearish month for Bitcoin, with an average price decline of 4%, according to data from Coinglass. However, this year has defied that trend, with Bitcoin posting a 7% increase so far. This counter-seasonal price trend could be another indicator that Bitcoin’s price is poised for a rally.
This shift is partly due to the rising hashrate, which suggests that Bitcoin’s price is playing catch-up. When the network’s hashrate increases while prices stagnate or decline, it often signals that market conditions may soon reverse, leading to a price rally.
Additionally, the upcoming difficulty adjustment scheduled for September 25 could play a role in this potential rally. This adjustment, which is projected to decrease by 5%, may indicate that the Bitcoin network is recalibrating to balance its increased hashrate with the current price. If difficulty drops, it could make mining slightly easier, incentivizing further mining activity and potentially boosting Bitcoin’s price.
Miners Start Accumulating Bitcoin
One of the most bullish signals in the market right now is that miners have begun to accumulate Bitcoin. For nearly a year, from November 2023 to August 2024, miners consistently sold Bitcoin to fund their operations. This sell-off was driven by the financial pressure from the halving, which cut their rewards in half.
However, data from Glassnode shows that in the past 30 days, miners have started accumulating Bitcoin again. This marks a significant shift in behavior, as it suggests that the financial strain from the halving is beginning to ease. When miners hold onto their Bitcoin rather than selling it, they reduce the supply entering the market. This decrease in supply, combined with growing demand, could create the conditions for a price rally.
Conclusion
The ongoing divergence between Bitcoin’s price and its hashrate, along with other factors like miner accumulation and counter-seasonal trends, could be setting the stage for a potential rally. Historically, these divergences have marked local bottoms and preceded price rallies, making the current market conditions worth monitoring closely. With publicly traded miners increasing their market share and beginning to accumulate Bitcoin, the supply-side dynamics may tilt in favor of a price surge in the near future.
While market factors like interest rates and macroeconomic conditions will continue to play a role, the underlying network data suggests that Bitcoin could be gearing up for a significant rally in the coming weeks.
