The price of bitcoin bottomed out at just over $ 3,500 in March thanks in part to the COVID-19 pandemic and the upcoming halving event in May that reduces the amount of new Bitcoins rewarded per block from 12.5 coins to just 6.25 coins. Yet, since then, the price has done almost nothing but rise. As of this writing, the price of Bitcoin is hovering around $ 7,000.
While it would be easy to suggest that last month’s price drop was the result of a pandemic alone, obviously that wasn’t the only reason. The fact that investors were setting prices and the impact of the upcoming halving event may also not be the only reason. Changes in spray rate may also be part of this reason.
What is the scattering rate?
The blockchain network scatter rate refers to the speed at which transaction blocks can be grouped, while cryptographic puzzles are solved to validate those transactions and reorganized into hashes (or strings of characters that represent a particular transaction). If the scattering speed is low, it means that the network is moving slowly through transactions, and crypto miners are solving cryptographic puzzles at high speed, which means that they have to wait longer for the reward.
Whenever a component has to wait longer to make money, it makes sense that its profit margin is probably not that high. Since March 21, the day when the price of Bitcoin suffered a sharp drop, the spread rate has increased and risen by 10%. That’s pretty big growth in a short amount of time!
How does the hash rate affect the price of bitcoin?
Part of the reason the scattering rate has increased is that the difficulty of solving these cryptographic puzzles on the blockchain has decreased. The greater the number of hashes per second that can occur, the greater the implied power to move the network forward and confirm transactions.
It then makes sense that increasing the rate of dispersion would further reduce difficulties and allow miners to move faster through transaction validation, making their efforts more profitable again.
The implied difficulty of how long it takes to validate transactions oscillates based on various factors, including the number of transactions going to the Bitcoin network at any one time, how many nodes are involved in validating those transactions, how much power they have to put on the network, and of course what happens in wider economy or given the coronavirus pandemic.
So, the reason for the rise in the price of Bitcoin is that more transactions are confirmed and once again the stability of the network is proven. That difficulty is likely to change within a few days, and the price is likely to fall after the recent launch of the bulls.
Why economic uncertainty and COVID-19 prove the value of Bitcoin
The more important thing to consider with everything that surrounds Bitcoin in everything that happens in the world is that while governments pump out incentive packages and grants to citizens to keep the economy afloat, governments ultimately expect money to somehow return to the economy.
The problem is that not everyone will return at the same speed or with the same force. There will be a void. There are currently people who have been fired and will not return the job when it is done, and there are debts that must be settled that will not necessarily be paid off, even if billions of dollars are allocated to both corporations and individuals during that time.
In contrast to the Bitcoin network which must surely deal with fluctuations but also cannot be counterfeited or duplicated in times of uncertainty. Everything related to Bitcoin supply and demand moves algorithmically. While whales investing in the market can certainly manipulate the price, the long-term value of the blockchain is what will sustain Bitcoin and other digital currencies during these times. Over the years, this current dose of uncertainty could be what catapults the adoption of Bitcoin to a whole new level and allows digital currencies to slowly dominate the world, even though some of the world’s smartest investors and economists still ignore its value.