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Lucky 13? Bitcoin’s (BTC) hash rate hits record on birthday

By Angelique Ruzicka

14:39, 4 January 2022

A birthday cake with the bitcoin symbol on top
Bitcoin celebrates its 13th birthday in 2022 - Photo: Shutterstock

It is impossible to usher in a new year without assessing the status of cryptocurrency favourite bitcoin (BTC). 

Bitcoin has started the year with a bang on news of its hash rate reaching an all-time high as it celebrated its 13th birthday on 3 January.

Bitcoin’s hash rate hit 203.5 exahashes per second (EH/s) just two days ago, indicating bitcoin’s network security is improving.

The hash rate refers to the total combined computational power used by miners and to mint new bitcoin and conduct new transactions. Basically, the higher the hash rate the more secure the network becomes as it requires more computing power to attack it.

According to Decrypt, Bitcoin’s hash rate has increased by 49% from the 136.5 EH/s recorded on 2 January 2021.

Chinese crackdown

But bitcoin has not always enjoyed such highs. Last year, its hash rate plummeted to 68 EH/s after a China crackdown on the cryptocurrency in the middle of the year. There were a few reasons for this crackdown, but environmental concerns were one of the reasons cited.

This continues to be an ongoing concern and could result in other crypto assets increasing in popularity.

“The record hash rate for bitcoin with more miners involved in managing the network might improve its security, but it also has major environmental implications, given that the rising rate is an indication that energy consumption is soaring.

“It may push more crypto enthusiasts concerned about carbon footprints towards other currencies like ethereum, which have moved more towards the proof-of-stake model. Ethereum is up 2.2% today compared to Bitcoin’s 0.65% rise,” points out Susannah Streeter senior investment and markets analyst Hargreaves Lansdown.

In a proof-of-stake model, the blockchain network is secured by users locking an amount of cryptocurrency into the blockchain network.

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Pro-crypto environment

Bitcoin’s hash rate has also improved as miners relocate to more pro-crypto locations, such as the US and Kazakhstan.

In fact, more and more financial institutions and governments are embracing the cryptocurrency and offering friendlier trading environments.  Italian bank, Banca Generali, for instance, is set to allow over 300,000 customers to buy and sell bitcoin through its partnership with Conio.  

BTC/USD

65,835.35 Price
-0.210% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

ETH/USD

3,444.48 Price
-1.300% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

DOGE/USD

0.13 Price
-0.390% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

SOL/USD

174.04 Price
-0.680% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.2652

It follows the bank’s $14m (£10.35m) purchase of a stake of the crypto firm back in December 2020, which has resulted in the bank offering users bitcoin custody. Integration of the Conio platform is expected to be completed in early 2022.

Meanwhile, Estonia’s Ministry of Finance has made reassurances that its new regulations will not ban the ownership of cryptocurrencies. Initially, a draft submitted to parliament created fears that the European country would impose a ban, but it has since been established that the bill is not targeted at customers.

Instead, the proposed legislation is aimed at virtual assets service providers operating in Estonia and addresses their offerings of anonymous wallets or accounts. It means they will have to embrace know-your-client regulations.  

Will bitcoin become mainstream?

In many ways bitcoin has already become mainstream with it becoming official legal tender in countries like El Salvador. As more adoption occurs, more regulations governing the trading and holding of cryptocurrencies will follow, as demonstrated by the Estonian government.

But this will not necessarily be a bad thing, according to Blair Halliday, head of UK at cryptocurrency exchange Gemini. 

“2021 proved to be a watershed moment for cryptocurrencies, which are now undoubtedly a mainstream asset class. Despite increasingly widespread adoption, rules governing crypto are virtually non-existent; in 2022, we expect that to change. Cryptoasset regulation will be a huge plus for investors. While some are concerned it will stifle innovation, we believe that a safe and stable regulatory environment will do the opposite. New rules will provide the framework which gives a swathe of retail investors confidence to invest in crypto for the first time.

“Some crypto exchanges have robust consumer protections – from high levels of insurance to institutional grade custody – built in as standard. But a lack of rules makes it hard for new customers to distinguish the best from the rest. We believe regulation can raise standards for exchanges, giving investors more certainty about the safety of their assets while creating an environment that encourages innovation”.

Bitcoin highs

Speculation is still rife over whether bitcoin will reach new highs. Analysts are divided on bitcoin’s prospects in 2022, which is hardly surprising, given its volatility.

“What is interesting is that the record high hash rate indicates that more miners are trying to join the party at a time when bitcoin’s struggling to recover its form and is still down around 30% from its November high. It is perhaps partly due (to) hopes bitcoin’s fall could be short lived, and that they might be able to profit from more valuable rewards in the future,” said Streeter.

Matt Senter, CTO and co-founder of Lolli, a rewards application that gives people bitcoin when they shop online, is more positive. 

“More countries, probably in Latin America, are going to embrace bitcoin within their legal framework, accelerating the need for lightning payments,” Senter said. “We will see pro-bitcoin legislation in the United States, if only regulatory in nature. We are going to see a new all-time high”.

Read more: Is El Salvador’s adoption of bitcoin a good idea?

Markets in this article

BTC/USD
Bitcoin / USD
65835.35 USD
-136.3 -0.210%
ETH/USD
Ethereum / USD
3444.48 USD
-45.15 -1.300%

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