Bitcoin’s hashrate saw its most dramatic fall of the last three years between June 15 and 24, according to Blockchain.com data.
Bitcoin’s hashrate decreased from nearly 943.6 billion terahashes per second (TH/s) on June 15 to 799.9 TH/s on June 24 — a decline of more than 15% and a level not seen since May.
The sharp drop has fueled speculation about possible geopolitical and environmental causes.
While the reason behind the sudden downturn is not yet confirmed, many in the cryptocurrency community are pointing to Iran as the cause of the fall in Bitcoin’s hashrate.
Iran’s presumed connection
Iran is known to run large-scale Bitcoin mining operations in the country. The National Council of Resistance of Iran reported in late May that large cryptocurrency mining operations run or protected by Iranian state actors, especially the Islamic Revolutionary Guard Corps, are even partly to blame for local power outages.
While this makes an Iran connection plausible, closer scrutiny raises some doubts about this theory. The Iranian government imposed a near-total internet blackout on June 20 to protect itself from cyberattacks, TechCrunch reported.
This coincided with the global hashrate falling from 884.6 million TH/s on June 19 to 865 TH/s on June 20. This represents a 2.2% decline.
This was followed by a US strike on Iranian nuclear facilities on June 22, which, according to Reuters, also led to electric grid outages. This coincided with a 1% fall in global hashrate from 869.9 TH/s on June 21 to 860.9 TH/s on June 22.
The connection is weak
Only a little over 3% of the total hashrate decrease coincided precisely with recent events in Iran. Furthermore, the hashrate fell by over 6.25% from June 15 until June 19, before Iran was bombed by the US or imposed the internet blackout.
This data shows that the hashrate was already on a steep decline before the events, and the ongoing fall is simply a continuation of an ongoing trend. A trend that may be exacerbated by events happening in Iran.
Other factors that are likely playing a role are rising electricity prices and the ongoing heatwave in the US. The heatwave results in lower mining efficiency, which might prompt low-profitability mining facilities to shut down.
Heatwaves also lead to higher power demand and higher power prices, further reducing Bitcoin mining profitability. New York-based utility Con Edison recently asked customers to conserve energy during the ongoing heatwave, which boosted power prices in some regions to their highest since January.
Still, Bitcoin’s network hashrate is not directly measured. It is instead calculated based on block time and current mining difficulty.
This is possible because mining difficulty provides information on how much computing power, on average, is needed to find a valid block. Since the computing requirement is an average and real-world mining has significant variations based on pure chance, this calculation of the hashrate is imprecise.
For this reason, the Iran theory cannot be dismissed, though market observers suggest a combination of geopolitical, environmental and economic pressures are at play.
Magazine: Inside the Iranian Bitcoin mining industry
