Ethereum Mining Hashrate on a Downtrend as China Sends Miners Packing

The regulatory clampdown on cryptocurrency miners in China is taking a toll on not just the Bitcoin (BTC) network, but also on Ethereum (ETH). The Ethereum mining hashrate, which attained its peak of 643,805.8731 GH/s back on May 20, 2021, according to data from Etherscan is fast on a decline. At present, the hashrate is pegged at 493,929.6709 GH/s after falling by a massive 21,397.4621 in two days.

The current functional Ethereum blockchain also works based on a Proof-of-Work (PoW) consensus mechanism. Like Bitcoin, miners in the Ethereum network are required to validate transactions by completing a series of computational puzzles to register transactions within a block. Mining machines such as Bitmain’s Antminers are used for these actions, and the exodus of miners from China has disrupted the mining ecosystem and the hashrate.

On the chart above, Ethereum’s mining hashrate has been climbing steadily since December 2019. While occasional disruptions are observable in the months succeeding, a sharper rise began towards the third quarter of 2020. The period culminated in a time when the broader digital currency ecosystem was seeing a massive embrace from both retail and institutional investors.

Impacts on the Price of Ethereum

A corresponding drop in price can be seen following the declining hashrate in the Ethereum blockchain. On the daily ETH/USD chart on TradingView, the world’s second-largest digital currency began a pervasive downward movement from the 12th of May. This price reversal was preceded by the attainment of a price of $4,300, the coins All-Time High (ATH), and coincided with the period in which the hashrate attained its peak. 

With the fall in valuation, we can see a positive correlation between price and the Hashrate, and while China has disrupted the mining ecosystem, a return to normalcy as miners seeks alternatives elsewhere may return prices back on the path of growth. At present, the MACD indicator is below the signal line, implying that the downtrend is far from over in the short term. 

A fundamental shift or resumption in mining at scale may contribute to ignite the technical indicators to retrace the run in price in the mid, and long term.

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