One consistently compelling metric is the evaluation of mining activity on Bitcoin, especially when viewed alongside price action and the broader market.
After all, miners are the group receiving freshly minted Bitcoin as the blockchain continues to grow. Because their revenue is paid in the network’s native coins, their behavior can offer useful signals.
Right now, something notable is happening. Hash rate — the amount of computational power securing the Bitcoin network — is rising. And it’s rising substantially.
At the same time, price is falling.
We are hitting one record hash after another. Yet the price plunged and has since traded sideways for months around the $20,000 level.
That is unusual. As the chart above shows, the last major drop — in May 2021 — coincided with a decline in hash rate. That makes intuitive sense: miners’ income is denominated in Bitcoin, so a large price collapse would normally reduce mining activity.
Instead, hash rate — and network difficulty — remain high. Most observers call that a positive sign, and they are right: a higher hash rate makes the network more secure, and a more secure network is healthier for Bitcoin.
But does it make economic sense? Are miners not selling as much as they should? While price has crawled sideways since the crash, miners don’t appear to be pulling back. Some point to Ethereum’s shift to proof-of-stake in September as having pushed miners toward Bitcoin, but the data do not fully support that claim.
Let’s inspect whether miners are selling (chart via Arcane Research).
After the capitulation in the summer, miners did not significantly increase sales. Could that change soon?
Recently I wrote about the possibility that Bitcoin might be one event away from a nasty red wick. Looking at the underlying mining data makes me even more uneasy. This is far from certain — more a concern than a prediction — but let’s review when we last observed rising hash rate alongside falling price.
It happened in mid-2018 — and it did not end well.
To make that period clearer — the chart above is a little busy — a focused view on 2018 reveals how hash power ramped even as price declined, followed by a painful year-end price outcome.
That pattern is worrying, and some regard it as a bearish indicator. But anyone familiar with my analysis knows I’m cautious about mechanically extrapolating past Bitcoin cycles to the present.
Yes, that occurred in 2018. But consider what Bitcoin was back then: it was still a niche asset that hadn’t yet attracted mainstream attention. Many people hadn’t even heard of it. The macro environment today is also fundamentally different — we’re in a new interest-rate paradigm. A crucial point when comparing cycles: none of those previous cycles occurred while the broader economy was already in a prolonged bear market.
Still, it’s not only that it happened before. I find it somewhat puzzling that miner selling isn’t noticeably higher now, and why hash rate is accelerating so aggressively.
In conclusion, this indicator alone doesn’t make me want to hit the SELL button. But I do incorporate mining data into my broader analysis, and the current behavior is unusual. As I noted last week, I worry that the current sideways action around $20,000 could end with a red wick. That level is psychologically important, and once it is decisively broken downward there isn’t much nearby support.
Too many variables on the wider market could easily push things south, and Bitcoin has not meaningfully escaped the contagion from the summer — equities have actually fared worse. This underlying mining activity neither alleviates nor fully clarifies those concerns.