The recent drop in the price of Bitcoin has hit miners quite hard. As their work is no longer profitable, some of them have had to stop mining BTC, which has impacted the hashrate and the average daily block time. Will it delay the next halving?
The escalating COVID-19 Coronavirus Pandemic has caused panic among investors
In the past couple of weeks, BTC/USD trading has been strongly impacted by what’s been happening in traditional markets. As the coronavirus spread quickly around the world, analysts and investors have started to realize that the global economic consequences would be huge, especially given that no one knows when it will be brought under control.
Faced with the uncertain global climate, investors quickly started selling their assets to adopt a more risk-off approach. Many face big losses and margin calls, pushing them to sell any investments to get cash. This triggered a global bearish movement on every asset class, including cryptocurrencies. Bitcoin, for example, lost up to 168% between February 15th and March 13th, as investors were faced with a liquidity crisis.
‘A liquidity crisis means that investors all rush to the exit doors at the same time, but there are so many more sellers than buyers that investors actually have a hard time offloading their assets for cash’ explains Anthony Pompliano on his blog Off The Chain.
Bitcoin’s Price Fall Impacted Median Confirmation Times
On the Bitcoin blockchain, miners are those creating new Bitcoins every time they solve complicated mathematical equations through a proof-of-work protocol in order to validate transactions and add them to the block. It takes on average 10 minutes to add a new block to the Bitcoin network.
‘Bitcoin miners secure the Bitcoin Blockchain because they get paid in Bitcoins to do so. The Bitcoin Blockchain is secured, to an important degree, by the Bitcoins that the miners earn’ explains Wences Casares, CEO of Xapo.
Miner revenues are directly linked to Bitcoin’s price performance. After reaching the $10,000 level, the most important cryptocurrency on the market fell strongly last week, falling to $3,600 at its lowest level, which means that revenues from BTC mining decreased as well, forcing some miners to switch off their equipment to reduce their costs.
As a consequence, the median confirmation time for a transaction to be accepted and added to the network increased. It went from 6.30 minutes on March 7th to 18 minutes on March 20th. The hash rate was also affected, as it went from 121 quintillion hashes per second on March 1st to 82 quintillion hashes per second on March 18th.
Can This Situation Impact the Date of the 3rd Halving?
If the price keeps bouncing back, then the median confirmation time should keep decreasing and the number of blocks created should rise, which shouldn’t impact the halving date, still currently planned for May 12th.
However, the BTC/USD’s volatility has reached its highest level in 6 years according to the Bitcoin Volatility Index, the situation might not change any time soon, as uncertainty on traditional markets should remain more or less constant, potentially intensifying investor fears.
Even if Bitcoin is still volatile, its price is back to around $6,000, and many investors believe that current levels might be an interesting entry point, especially with the upcoming halving. For Michael Novogratz - CEO of Galaxy Digital, 2020 will even be Bitcoin's year!
Featured image via Pixabay.