Bitcoin miners are an essential component of the BTCUSD ecosystem. They lend their processing power to mine Bitcoins. The miners receive compensation for their service in the form of Bitcoins.
Bitcoin halving, which was one of the most awaited events in the crypto space this year, occurred on May 11. It reduced the rewards for the miners from 12.5 BTC to 6.25 BTC.
BTCUSD Hash Ribbons enters capitulation after Halving
The hype regarding the Halving event was because of its historical significance. The last Halving, which happened in July 2016, caused an approximately 3000% jump in BTCUSD.
However, the Halving had a more direct and immediate effect on the miners than the price. Mining Bitcoin consumes a lot of electricity. And as long as miners are profitable, they will continue to mine. However, with the decrease in BTCUSD prices, and the rewards being halved, several miners turned unprofitable.
Therefore, those miners stopped their systems and moved out of the network. When large numbers of miners move out of the network, the Hash Rate of the network falls drastically. Hash Rate signifies security as well. It caused a minor capitulation in the BTCUSD system.
Hash Rates have spiked suddenly to near ATH levels
If miners keep leaving, the security of the Bitcoin Blockchain network might get compromised. Therefore, the mining difficulty level adjusts itself to reduce electricity consumption. Recently, the difficulty level fell drastically.
The adjusted difficulty level intends to keep Bitcoin mining profitable. This auto adjustment is also a crucial feature that ensures that the system’s security does not get prejudiced.
The BTCUSD hourly chart shows a consolidation phase. Source: TradingView.com
The Hash Rates have now spiked to approximately all-time high levels. It might indirectly cause BTCUSD to rise in the immediate term.
But it should not be confused as a Bullish signal! The difficulty level will re-adjust to the previous level within two weeks.
