The currency is still profitable enough for many players to stand still, defying speculation that prices.
As bitcoin is falling, one would expect mining activity to fall as well. It is not what happened. The combination of falling prices and a rise in the hash rate - which measures the computing power - shows how complex the economy of cryptocurrency mining is.
A rising hash rate means that bitcoin mining is still profitable enough for many players to sit still, defying speculation that prices have fallen below break-even points. It may be a reflection of the sophistication that bitcoin mining has become after the 1,400 percent price increase recorded last year.
While that attracted a fair amount of mining enthusiasts, the lucrative rewards also led major miners to improve by adopting increasingly faster chips and opening offices in places with cheap electricity. That helped them get rid of the competition from smaller players when prices fell to the level of US $ 6,000.
"There are still large expansions, especially from more efficient miners," said Marco Streng, Genesis Mining's chief executive, by telephone from London. "The expansion is so great that I compensate the exit of the less efficient miners".
New bitcoins are created when computers compete to process transactions by solving complex puzzles in exchange for tokens. As the power of mining increases, the calculations necessary to generate new digital currencies become more difficult: a mechanism designed to limit supply and ownership in the hands of a few miners.
The race to get ahead with cutting edge technology has intensified so much that the miners became key customers for semiconductor giants like Nvidia Corp. and Taiwan Semiconductor Manufacturing Co.
And thanks to these advantages, the business became increasingly institutionalized and concentrated in the hands of companies such as Bitmain or Bitfury. Computational power While an acceleration of gains in the hash rate already coincided with price increases in the past, the relationship between the two is not so direct.
In theory, a rising hash rate should raise the price because it means that the cost of each token is higher . But now the computing power may be growing due to previous expansions of capacity, which are an irrecoverable cost for the miners and reflect higher previous prices.
It is also possible that miners sell more of their holdings as margins are reduced."Hardware efficiency is rapidly increasing and costs are falling," researchers Christopher Bendiksen and Samuel Gibbons wrote. "The miners are guaranteeing access to highly competitive sources of electricity, often those that would otherwise be inactive, and show high degrees of mobility."