Price Discovery

Happy Bitcoin Friday! — Nov. 15, 2024

Price Discovery

Bitcoin is in price discovery mode.

In today’s Bitcoin Binge:

• bitcoin hash rate

• bitcoin mining

• all time high prices

• institutional adoption

We’ve been here before.

All time high territory.

Bitcoin prices, market cap, adoption, and media coverage all soaring. Maybe more important than any of those, however, is bitcoin’s hash rate.

That is, the amount of computing power on the bitcoin network. Bitcoin is the most powerful and secure computing network in history. The more miners online, the more powerful the network, and the hash rate continues to climb.

Hash Rate

A rising hash rate also means bitcoin mining is more difficult. It’s good for bitcoin mining to be both rooted in the real world and more difficult.

Bitcoin miners are essential to the value of the broader bitcoin network and, in turn, the price of bitcoin the asset. You see in the above chart that price (in black) doesn’t always follow hash rate. Miners are hashing (or working) constantly. There are brief, choppy, periods of volatility but hash rate grows at an almost calculated parabolic rate. The two metrics tend to meet at pivotal times but external catalysts from traditional equity markets, global, political, or other industry-related developments create more volatility for the price of bitcoin.

Miners always work.

Hash rate always increases.

As long as the bitcoin network continues to see increased usage, the hash rate will rise despite bitcoin mining becoming more and more difficult over time.

Things of value require hard work.

That is the key difference between bitcoin and all other cryptocurrencies. Bitcoin mining is also called proof of work. The miners dedicate their time and energy to process transactions on the network and compete for the chance to earn a reward for processing those transactions. Without bitcoin miners, there is no bitcoin network. More miners means more real world investment in the bitcoin network. And, because anyone, anywhere in the world can mine bitcoin, more miners also means greater decentralization of the network.

The price gets wild from here.

We’re in price discovery mode.

Hash rate, however, rises.

That’s a near lock.

If you understand the value of bitcoin mining and a proof of work consensus protocol, you see that so long as miners see value in staying online, the future of the bitcoin network remains intact.

Just a Number

Price is just a number.