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Because the hash rate is still moving, the ratio of Bitcoin price to hash rate faces bulls with a protracted wait.
Bitcoin (BTC) had a roughly 28 percent reduction in mining difficulty on July 3, but one model predicts that the BTC price will not bottom until October.
In a series of tweets on July 2, investment manager Timothy Peterson flagged the relationship between Bitcoin price and hash rate as arguable evidence that the dip is not over.
Hash rate model: Long road ahead to Bitcoin bottom
Bitcoin mining difficulty dropped by an estimated 27.94% on Saturday at block height 689,472, the biggest in its history.
As previously explained, the drop is in response to the ongoing miner migration out of China and the subsequent loss of hash rate.
For miners who are still working, the decline will represent a profit increase since difficulty automatically adjusts for changes in hash rate, making it more appealing to mine when it decreases.
Miners in transit are not anticipated to return to their craft for several months. During that period, difficulty is expected to rise again as hash rate rises, resulting in more competitors and power competing for the same fixed payout.
The adage that “price follows hash rate” is a popular one among Bitcoiners, but if it is true, one model documenting the phenomena paints a bleak picture of future price behaviour.
When it comes to identifying macro price peaks, Peterson believes the link between price and hash rate is “useful.”
An additional graphic depicts surges in 2013 and 2017, which correlate to peaks that lasted for the whole four-year halving cycle.
The connection appears similar in 2021, but after the May surrender, it has been moving towards 1 — the point at which the Bitcoin price should have entirely “corrected.”
“Based on the current trend in P(h), this bubble would finish collapsing by 31 October,” Peterson summarized.
“The ratio includes any combination of a higher hash rate and lower price. So increasing hash rate and stable price also resolves the bubble.”
In other words, while the return of miners is likely to prevent additional price dips of the scale experienced recently, bulls may still have to wait longer than desired for higher levels to reappear.
Peterson included a significant disclaimer, stating that there are “many things wrong” with such a basic model, and that he does not use it personally.
Pick your end-of-year price showdown
The model isn’t the only one predicting a Bitcoin comeback in the second half of the year.
As previously reported, experts have compared 2021 to both prior peak years, which saw a first local price high, a correction, and then a surge to the ultimate peak later on.
Meanwhile, when BTC/USD produced its third straight monthly red candle, the stock-to-flow price model mirrored the beginning of 2019, shortly after the bottom of Bitcoin’s previous significant bear market.
The following six months, according to PlanB’s inventor, will be essential for its utility.