Bitcoin’s discount to hash rate is at its highest since early 2020, Bloomberg Intelligence senior commodity strategist Mike McGlone said in his recent market report. The leading cryptocurrency is still undervalued despite its five-fold surge over the last 12 months, meaning that it may continue its rally,” he added.
The hash rate is a measure of the power of cryptocurrency networks. The more powerful the network, the faster it can process transactions and confirm new blocks.
In his April report, McGlone wrote:
BTC’s discount to its hash rate is at its highest level since early 2020. This suggests that miners are not finding bitcoin attractive relative to alternatives such as Ethereum.”
The leading cryptocurrency is still undervalued despite its five-fold surge over the last 12 months, meaning that it may continue its rally.
Bitcoin Sets Record Discount Since 2020
“Bitcoin remains one of the best value propositions in financial markets today and should trade at a multiple between $72,000 and $108,000,” Mike McGlone wrote in his latest report on Bitcoin’s discount to hash rate.
The analyst noted that in order for this scenario to play out, bitcoin will have to gain about 300% from current levels over the next 12 months. This would require another leg down after a short-term correction followed by an extended bear cycle in 2020 (as seen on previous occasions).
The hash rate is the measuring stick for how many transactions can be processed by the Bitcoin network in a given time frame, and it also serves as a good indicator of how healthy and secure the Bitcoin network is. The higher the hash rate, the more secure mining becomes.
When miners are working together to solve complex mathematical puzzles in order to receive rewards from earning new bitcoins, they use computing power—or hash power—to validate transactions on their computers.
The number of hashes generated per second has fallen dramatically since February, when BTC’s price reached $19k but then started falling rapidly (it now sits at around $10k). This decline can be attributed both to rising electricity costs and increased difficulty in mining BTC due to increased competition between miners who want access to cheap electricity sources or other means of lowering costs such as using open-air mining rigs instead of expensive mining farms located near hydroelectric plants or natural gas fields with cheap energy prices.
