The hash rate highs come as BTC and ETH prices slid, losing some of their gains made thus far in 2021. Evidently, price volatility has not discouraged miners from supporting either network.
Cryptocurrency Prices Fall but Fundamentals Remain Strong
The first couple of weeks of 2021 have been a rollercoaster for cryptocurrency investors. Bitcoin and Ethereum both started the year by continuing to build on rallies that began in 2020.
Bitcoin first broke $30,000 on Jan. 2 and continued to climb to its current all-time high of just below $42,000 on Jan. 8. Meanwhile, ETH topped out at around $1,350 after opening the new year at less than $750.
The upwards momentum came to an abrupt halt on Sunday, however. By Monday, BTC had fallen to around $31,700 and ETH traded below $1,000 again.
Despite the 25% price drop, network fundamentals remain strong. As detailed by Coin Metrics weekly ‘State of the Network’ report, some measures of cryptocurrency strength continued to rise.
Both Bitcoin and Ethereum hash rates have hit an all-time high. Hash rate refers to the combined power of all mining hardware securing a blockchain network.
An increasing hash rate indicates that miners continue to deploy hardware on the network in the expectation of future profits. This suggests that both Bitcoin and Ethereum miners remain confident, even in the face of a large pullback.
Bitcoin’s rising hash rate looks likely to continue with major operations planning for expansion this year. As BeInCrypto has previously reported, several US mining companies have recently made massive orders from mining rig manufacturer Bitmain.
The hardware Marathon Patent Group and Core Scientific have ordered will not arrive until later this year. Its eventual delivery will significantly expand each company’s existing operations.
BTC and ETH Active Addresses also Growing
In addition to observing hash rate all-time highs, the Coin Metrics report also highlights growth in BTC and ETH active addresses. The number of addresses making transactions on both networks is nearing the peaks set during the 2017 bull market.
Coin Metrics stresses that active addresses do not give a clear picture of growth of network usage. This is because many cryptocurrency users prefer to use multiple addresses. One address, therefore, doesn’t necessarily mean one user.
However, the research firm writes:
|But with that in mind, active addresses serve as a good proxy for overall usage. The increase in BTC and ETH active addresses signals that on-chain activity is increasing for both networks.”
Additionally, Coin Metrics highlights a growth in the number of addresses holding 1,000 BTC or more. Used as a proxy for institutional adoption of Bitcoin, these ‘whale’ addresses saw a large increase since the start of 2021.
Inspired by the likes of Michael Saylor’s MicroStrategy BTC buying, the end of 2020 saw multiple financial institutions and corporations taking up positions in Bitcoin. Many observers are expecting this trend to continue into 2021.
Indeed, MicroStrategy is hosting an online event titled ‘Bitcoin and Corporations’ next month. The business analytics firm will be sharing how it came to its decision to buy BTC, as well as the methods it used to do so.