Bitcoin Hashrate Experiences Significant Decline Amid Speculations

According to data from Blockchain.com, Bitcoin’s hashrate experienced its most dramatic decline in the past three years between June 15 and Tuesday. The hashrate fell from nearly 943.6 billion terahashes per second (TH/s) on June 15 to 799.9 TH/s on Tuesday, marking a decrease of more than 15%.

Bitcoin hashrate three-year chart. Source: Blockchain.com

This sharp drop has sparked speculation regarding potential geopolitical and environmental causes. Although the exact reason for the sudden downturn remains unconfirmed, many in the cryptocurrency community suspect Iran to be a contributing factor.

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Iran’s Presumed Connection

Iran is known for its extensive Bitcoin mining operations. The National Council of Resistance of Iran reported in late May that large cryptocurrency mining operations, managed or protected by Iranian state actors, particularly the Islamic Revolutionary Guard Corps, are partially responsible for local power outages.

While this connection to Iran seems plausible, a closer examination raises doubts. According to TechCrunch, the Iranian government imposed a near-total internet blackout on Friday to protect itself from cyberattacks. This coincided with the global hashrate falling from 884.6 million TH/s on Thursday to 865 TH/s on Friday, a decline of 2.2%.

A subsequent US strike on Iranian nuclear facilities on Sunday, reported by Reuters, also led to electric grid outages, aligning with a 1% fall in global hashrate from 869.9 TH/s on Saturday to 860.9 TH/s on Sunday.

The Connection is Weak

Only a small portion, just over 3%, of the total hashrate decrease directly coincided with recent events in Iran. Moreover, the hashrate had already declined by over 6.25% from June 15 until Thursday, before the US bombing or the internet blackout in Iran.

This data indicates that the hashrate was already on a downward trend prior to these events, and the ongoing decrease might simply be the continuation of this trend, potentially exacerbated by events in Iran.

Other Influencing Factors

Additional factors likely influencing the hashrate include rising electricity prices and the ongoing heatwave in the US. The heatwave decreases mining efficiency, which may lead low-profit mining facilities to shut down. Heatwaves also increase power demand and prices, further reducing Bitcoin mining profitability. New York-based utility Con Edison recently urged customers to conserve energy during the heatwave, leading to the highest power prices in some regions since January.

It’s important to note that Bitcoin’s network hashrate is not measured directly. It is calculated based on block time and current mining difficulty. Mining difficulty provides an indication of the average computing power needed to find a valid block. However, since real-world mining has significant variations based on chance, this hashrate calculation is imprecise.

While the Iran theory cannot be entirely dismissed, some market observers suggest that a combination of geopolitical, environmental, and economic pressures may be influencing the situation.

Image Credit: cointelegraph.com