On March 7th, the bitcoin price was at $9,200 and today, the digital asset went as low as $7,636. Another such percentage of pullback means wiping out all the gains made by Bitcoin in 2020.
However, the Bitcoin network continues to grow. After the hash rate made its all-time high at 136.2 Th/s on March 1st, the difficulty of the bitcoin network continues to rise as well. Today, the network will make yet another positive difficulty adjustment of as much as 7%.
“Difficulty adjustment (which keeps time between blocks at 10 minutes, regardless of hashrate) will be a massive +7%! No sign of weakness 2 months before the halving,” said analyst PlanB.
Currently, the difficulty of mining a bitcoin block is at 15,486,913,440,292.87 which will increase to 166.7 trillion after this adjustment.
In Dec. 2018, the difficulty bottomed at 15 trillion only to rise throughout 2019 and to-date in 2020 except for a slight pullback in Nov. last year.
PlanB who determines bitcoin’s value by using the stock-to-flow model explains that historically, this means “hashrate and difficulty will keep rising after the halving, so no “miner capitulation” or “death spiral” despite all FUD.”
However, bitcoin whale Joe007 has some warning to give. With bitcoin price falling and hash rate and difficulty rising, this won’t be good for all the miners and some have to make an exit which means selling their BTC.
“Overleveraged miners are going to be unbelievably fucked come halving” with “BTC collateral that needs to be liquidated, to the tune of hundreds of millions USD,” he said.
However, if we take a look at the seventh-largest cryptocurrency by market cap, Litecoin whose halving occurred on Aug. 5, last year, it’s hash rate dropped over 7% after the event.
In mid-July 2019, the hash rate of the Litecoin network climbed to its peak at 523.8 Th/s. The hash rate bottomed out at 130 Th/s in Dec. 2019 and has yet again started rising, currently at 189.4 Th/s.
Addressing this “LTC halving FUD,” PlanB said “because Litecoin didn’t jump on ltc halving, btc halving will also be irrelevant for bitcoin,” is “flawed” logic. This is because Litecoin has no S2F-price cointegration, unlike Bitcoin whose has been “spot on until this very day, even with futures since Dec 2017.”
As such, because halvings are irrelevant from the Litecoins’ perspective, but with BTC, it’s price-s2f relation is “strong”.
For Litecoin, it doesn’t mean good things as no having substantial integration with S2F means its price does not go up after the halving and miners switch off.
“If a coin has a halving but no cointegration with price, it will die,” PlanB said.