Cryptocurrency prices, including bitcoin’s, have been turbulent this year — a scenario that’s weighed on shares of miners. Some relief could be in sight because the largest digital currency gained nearly 6% for the week ending Monday, April 14. Some experts believe that if bitcoin can break through the $85,000 level with some authority, fresh buying will commence.
Should that scenario play out, ETFs such as the CoinShares Valkyrie Bitcoin Miners ETF (WGMI ) could make for predictable beneficiaries. However, some data points indicate that bitcoin miners, including WGMI member firms, are already betting on higher prices. Recent data confirm the bitcoin hash rate has been surging. Investors considering WGMI Anad bitcoin itself should pay attention to that metric.
“A hash rate is the rate at which a blockchain network like Bitcoin generates hashes, or hexadecimal numbers that are the result of sending transactional data through hashing algorithms,” according to Investopedia.
In other words, the hash rate gauges the computing power miners are devoting to their activities. When it’s increasing, that can signal miners are expecting prices to increase. Think of it as oil producers boosting drilling in advance of prices rising.
Bitcoin Hash Rate Surging
It’s not a foregone conclusion that a deeper bitcoin rally is imminent, but data confirm miners, including some residing in WGMI, are boosting their hash rates.
“Despite Bitcoin’s recent price underperformance, the "Bitcoin Hashrate":https://www.bitcoinmagazinepro.com/charts/bitcoin-hashrate-chart/ has been going absolutely vertical, breaking all-time highs with seemingly no regard for macro headwinds or sluggish price action. Typically, hash rate is tightly correlated with BTC price; when price drops sharply or remains stagnant, hash rate tends to plateau or decline due to economic pressure on miners,” reported Matt Crosby for Bitcoin Magazine.
Potentially making matters all the more interesting is that miners are lifting hash rates against what’s been a trying backdrop for risk assets — one including U.S. trade tariffs, which have heightened the specter of a trade war with China.
Add to that, as Bitcoin Magazine noted, there’s now divergence between bitcoin prices and the hash rate — one that’s wide by historical standards and one that could portend a significant near-term price move. Moreover, miners are increasing hash rates at a time when it’s not profitable to do so, indicating a willingness to incur some short-term pain in exchange for long-term gain.
“Despite terrible profitability, miners are not only staying online, they’re deploying more hash power. This could imply one of two things; either miners are racing against deteriorating margins to front-load BTC accumulation, or, more optimistically, they have strong conviction in Bitcoin’s future profitability and are buying the dip aggressively,” added to Bitcoin Magazine.
For more news, information, and analysis, visit the Crypto Channel.
