BT Daily News: Bitcoin Crypto Miners Back on Track; Hashrate on Recovery

1. Bitcoin Crypto Miners Back on Track; Hashrate on Recovery

Bitcoin’s hashrate shrunk on December 25 and set a new record for the lowest hashrate in the last three months, Although while writing this article, the hashrate is back to its earlier position.   

On December 25, 2022, the hashrate of the Bitcoin network decreased and came down to 170.60EH/s. This occurred because of snowfall which froze the United States and put a strain on the nation’s electricity grid leading to a temporary drop in hashrate.

CoinWarz hashrate mining calculator data says that a heavy decline is seen in Bitcoin mining hashrate due to extreme climate conditions in the United States. However, it is important to note that the declined hashrate climbed back to 241.29 EH/s.

A particular statement by John Stefanop, founder of FutureBit when quoted that the reason behind declining hashrate is the number of “highly centralized mines” turned off at similar periods.

He also added, “I know, does not change the fact that a few large mines in Texas affect the entire network to the tune of 33%… everyone’s transactions are now being confirmed 30% slower because the hashrate is not decentralized enough.”

Stefanop noted, “If hashrate were distributed evenly around the world by 10’s of millions of small miners instead of a few dozen massive mines, this event would not have even registered on the network.”  

Cambridge Bitcoin Electricity Consumption Index states that the United States accounts for around 37.84% of the average monthly hashrate share. Nevertheless, New York, Kentucky, Georgia and Texas all of these states had experienced power outages due to the winter storm.

Dennis Porter, Chief Executive Officer of Bitcoin mining advocacy group Satoshi Action, told his followers that “while the inclement weather specifically in Texas has affected 30% of Bitcoin hashrate alone. 

On September 29, 2022, Dennis Porter shared his thoughts in the Tweet. His tweet clearly showed his support for Bitcoin, whereas he also warned the Ethereum Community and the Ethereum Founder, Vitalik Buterin.

2. Bitcoin hashrate recovers after big freeze shuts down miners

Bitcoin’s network hash rate has returned to regular levels again, days after freezing temperatures across the United States put a strain on the nation’s electricity grid — leading to a temporary drop in hash rate.

In the days leading up to Christmas, bone-chilling temperatures swept across the United States, leading to millions without power and claiming at least 28 lives.

According to reports, Bitcoin miners in Texas, which accounts for a significant portion of the country’s hash rate, voluntarily curtailed operations to give power back to the grid — so that residents can keep their homes heated.

The disruptions appear to have put a dent in Bitcoin’s hash rate, which typically hovers around 225-300 Exahashes per second (EH/s). This fell to 170.60 EH/s on Dec. 25.

As of Dec. 26, however, the hash rate has returned to 241.29 EH/s, according to data from hash rate mining calculator CoinWarz.

Bitcoin’s hash rate is calculated by measuring the number of hashes produced by Bitcoin miners trying to solve the next block. It is regarded as a key metric in assessing how secure the Bitcoin network is.

The recent events prompted a controversial statement from FutureBit founder John Stefanop, who suggested the fall in hash rate was due to a number of “highly centralized mines” in Texas turning off at the same time.

“I know, does not change the fact that a few large mines in Texas affect the entire network to the tune of 33%...everyones transactions are now being confirmed 30% slower because the hashrate is not decentralized enough,” he said.

“If hashrate was distributed evenly around the world by 10’s of millions of small miners instead of a few dozen massive mines, this event would not have even registered on the network,” Stefanop added.

Bitcoin bull Dan Held however refuted Stefanop’s take on the events, arguing that weather patterns do not mean centralized ownership or control.

According to the Cambridge Bitcoin Electricity Consumption Index, the United States accounts for 37.84% of the average monthly hash rate share. The top four states in the country for Bitcoin mining include New York, Kentucky, Georgia and Texas — all of which had experienced power outages due to the winter storm.

However, Dennis Porter, the CEO of Bitcoin mining advocacy group Satoshi Action Fund noted to his 127,400 Twitter followers on Dec. 25 that while the inclement weather, particularly in Texas, caused 30% of Bitcoin’s hash rate in the United States to go offline, the network “continues to work perfectly.”

3. Crypto Is Down Bad, But VCs Keep Pouring Money In

Given the contagion and chaos we have witnessed since Sam Bankman-Fried’s crypto exchange FTX had a sudden multibillion-dollar coronary, you may be tempted to conclude the entire crypto industry is headed for the great Chapter 11 bankruptcy filing in the sky, and that nobody in their right mind could possibly still have faith in it.

And yet, even in the frigid cold of Crypto Winter, venture capital continues to pour in for certain lucky builders.

Analysts at Pitchbook report that crypto VC investment in 2022 (a brutal year across all tech) has outweighed that of both fintech and biotech, pulling in $6.5 billion over the last 12 months, $879 million of it in the last quarter.

Just take a look at the last week or so of drab crypto industry press releases. You’ll see a $4.75 million round for a thing called Earn Alliance. A $70 million raise for a thing called Ramp Network. A further $15 million for Roboto Games, $3.1 million for NFT game Burn Ghost, and a vertiginous $72 million for market maker Keyrock. There are even giddy plans for a $2 billion metaverse fund by Animoca Brands, while crypto derivatives exchange Matrixport, led by former Bitcoin mining kingpin Jihan Wu, is gunning for a $100 million raise—at a valuation of $1.5 billion.

It’s easy to understand why venture capital firms continue to take these risks. VCs are like sharks—they have to keep swimming by investing in crap (sorry, “decentralized technologies”) or they’ll die, even in a bear market. But why do they continue to put their riches into stuff that keeps failing?

Everywhere you look, the industry appears to be in full tail-spin. Just last month, Multicoin Capital, Kyle Samani’s previously high-flying and exuberant firm, had its assets frozen due to exposure to FTX. Some of the biggest funders in the space, like Babel Finance, Three Arrows Capital, and FTX’s own venture arm, caused some of the biggest explosions. Star-studded companies like Blockstream, meanwhile, are writing their valuations down by orders of magnitude, and the $1.5 billion valuation sought by Matrixport looks positively modest compared to the $32 billion valuation once commanded by its now-deceased competitor.

All of this has caused an obvious chilling effect. Every VC firm and project I spoke to says they are being far more cautious than before with regard to investments. A Coinbase spokesperson noted carefully that funding has “tightened.”

Animoca Brands CEO Yat Siu, meanwhile, told me cryptically that “some deals may not make as much sense as they did a few months ago due to market circumstances or changes in valuations.”

Ramp Network business lead Paulina Joskow told me that she has heard of a number of projects failing to meet raising requirements, along with a number of deals falling through at the last minute. Many projects, she added, don’t look forward to anything bigger than a Series B before the VC taps shut off.  Kevin de Patoul, the CEO of the market maker Keyrock, said he has noticed a fresh emphasis on “due diligence”—utterly unremarkable in most other industries, but something of a groundbreaking shift in crypto.