Bitcoin is trading at its highest level in more than 18 months, with its price up more than 100 per cent since the start of 2023.
The rally has pushed bitcoin’s market cap above $700 billion and the overall crypto market close to $1.5 trillion. The figure is still a long way from its all-time high of around $3 trillion, which was reached at the end of 2021, however some crypto analysts believe the recent gains are the beginning of another record-breaking run.
Bitcoin’s hash rate – which denotes how much computing power is required to verify transactions and generate new units of the cryptocurrency through a process called mining – hit a record high this week, according to data from Blockchain.com.
This signals a resilient network, with hopes of future price gains attracting an increasing number of miners. Recent reports have revealed significant investment in cryptocurrency mining from both state-backed and commercial ventures.
Tether, the issuer of the stablecoin USDT is planning to invest $500 million in mining, while satellite imagery analysed by Forbes suggests Bhutan’s government is establishing a massive bitcoin mining operation in the foothills of the Himalayas.
Separate data reveals that miners have been profiting from cheap energy sources to reduce their average BTC production cost by 35 per cent from $21,100 to $13,800.
“This data underscores a considerably stronger profitability in the mining sector compared to the challenges experienced throughout 2022 and part of 2023,” said research analyst Matteo Greco from the fintech investment firm Fineqia International.
In roughly six months, bitcoin will undergo an event known as a “halving”, which will see the amount of new bitcoins awarded to miners cut by half.
The event was hardcoded into bitcoin’s underlying blockchain by its pseudonymous creator Satoshi Nakamoto, who introduced it as an anti-inflationary measure when the cryptocurrency first launched in 2009.
Taking place approximately every four years, the build up to the halvings have traditionally been the most profitable time for crypto investors.
“Buy bitcoin six months before a halving and sell 18 months after a halving has historically beaten ‘buy and hold’ trading strategy,” Dutch crypto trader PlanB wrote earlier this year. “The next halving is April 2024… Will this strategy work again?”