As Bitcoin price rebounds above $6,000, some miners return to mining

Bitcoin prices have rebounded strongly over the past week or so, recovering almost 50% of their value from the lows hit during the extreme panic-induced sell-off earlier this month.

As prices have recovered, some Bitcoin miners have begun to return to the market and resume mining, as evidenced by the slight increase in the total network computing power (hash rate).

After the fatal panic sell-off, the network's computing power has recovered

Bitcoin is a unique financial asset because it represents the value of an entire distributed blockchain network and is maintained through a process called proof of work. Miners solve complex mathematical equations to prove that transaction verification work has been completed, and are rewarded with bitcoins released from the block as a reward for their initial effort and production costs.

The goal of miners is to produce Bitcoin at a cost of production far below the price, thereby making a profit.

But when the price of Bitcoin hits its lowest point, miners typically capitulate and either shut down the farms they operate or simply turn off their machines until the price of Bitcoin rebounds.

During the recent panic sell-off caused by the coronavirus pandemic, the first-ever cryptocurrency fell from $10,000 to below $4,000 in a matter of weeks.

The plunge caused many miners to shut down their machines, as evidenced by a sharp drop in the cryptocurrency network’s hash rate.

Bitcoin hash rate is increasing, though some lagging mining operations capitulate as Bitcoin price hits $5,000

Miners simply turned off their machines and waited for the price of Bitcoin to rise so that the price would allow mining again — Rekt Capital, March 24, 2020

However, as the price of Bitcoin has recovered strongly enough, some larger Bitcoin mining operations have been able to cover their initial investment returns on energy costs, and the overall network computing power has begun to recover.

Despite price rebound, Bitcoin price continues to remain below average production cost

As far as Bitcoin mining is concerned, it has the characteristics of survival of the fittest. When the price of Bitcoin falls to such a low level, only miners with the lowest energy costs and the highest operational efficiency can bear such a great risk.

While the hash rate does show signs of recovery, the price of Bitcoin remains below the cost of production for most small miners, who prefer to buy cryptocurrency directly from exchanges rather than run expensive, energy-consuming rigs at mining farms.

The recovery in hash rate is a relatively positive sign. The concern is that as smaller miners leave the market, the computing power behind the Bitcoin blockchain will become increasingly concentrated, with only the largest and most efficient miners controlling the lion’s share of the network, essentially destroying the value of the asset as a distributed network.

If someone wants to take advantage of this opportunity to exploit a vulnerability in the protocol, any single entity that gains a majority of the network's computing power could have a devastating impact on Bitcoin. (Caiyun Blockchain)

Solemn statement: The copyright of this article belongs to the original author. The article is reproduced for the purpose of spreading more information. If the author information is marked incorrectly, please contact us as soon as possible to modify or delete it. Thank you.