Ethereum hashrate, the total power of the network to handle transactions, has fallen significantly in the last two months due to the poor performance of ether in the cryptocurrency market. With prices hovering around $200, there is no profitability for newly established cryptocurrency mining startups, and the ones that are still mining are doing it at a loss.
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Ethereum Network Problems
The ethereum hashrate has dropped steadily this last month, according to Etherscan.io numbers, due to the massive losses that miners are experiencing when mining ethereum. With today’s prices, opening new cryptocurrency mining startups would be betting on the future of the currency; just maintaining a mining operation is a difficult task.
Profitability, depending on the approach taken to calculate, is just barely hanging on a support level, with prices having bottomed out at the current number. Take into account the whole price assembly of a mining operation, including mining hardware costs and accessory expenses, it is currently impossible to set up an operation starting from scratch.
More so, there are other issues that can be impacting ethereum profitability in the short term. The new (and dropped) Constantinople update carried a bomb for Ethereum miners that could not be applied due to lack of consensus.
Constantinople Stalled on Testnet
The new and talked Ethereum update that had brought a multitude of changes to the Ethereum Network has problems and stalled on a testnet due to “lack of Consensus.” Because of that, Ethereum devs decided to make a revision of the proposed changes.
Subsequently, the update was shunned with developers declaring that they would make more tests, delaying it for the next year. One of the most significant changes that Constantinople brought to the table was the reduction of the block reward to two-thirds of the original reward (known as the two-thirding).
This measure would have destroyed the market even more and caused more and more miners to drop mining until it is profitable again. Hashrate is still sufficient for normal network activity, but a decline in hashrate makes the network slower and more vulnerable to attacks.
Supply And Demand
And while some Ethereum devs are worried about this, the reduced output of the network will eventually cause a rise in the prices, as is normally the case due to the law of supply and demand. With less Ether being available in the market, supply will fall and if demand stays the same, there will be a rise in prices in the short term.
But this is highly unlikely, with the sentimental factor driving the market down and with a sideways movement for a good time this last month. If hashrate keeps falling even more, prices will bounce and it will stir up enthusiasm for mining once again.
Mining, Hashrate, and Market Prices
It is difficult to find the right equation to bind these three factors and make sense of where the market stands right now. Hashrate and mining do impact market prices in a significant way because they drive supply. Demand is driven by the market price and the sentimental factor. So to have an idea of all this, all factors should be taken into account.
But even with this holistic approach, it is really difficult to make an educated guess about mining involvement and when these miners will board the mining ship. The best answer would be “when it becomes profitable again.”
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