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S2F Creator: Bitcoin Hash Rate and Difficulty Surge “Like Clockwork”

The difficulty of mining Bitcoin hit a new all-time high on September 20th, continuing its uptrend since the halving in May this year. PlanB, the creator of the stock-to-flow (S2F) model, commented on the numbers, suggesting Bitcoin is en route to $100,000 with mining difficulty rising "like clockwork."

The S2F model predicts bitcoin to reach $100,000 by late 2021 based on the scarcity and its halving cycles.

Over the longer term, the S2F model anticipates the Bitcoin price to hit $288,000, possibly before the end of 2024. PlanB explained:

“S2FX model estimates a market value of the next BTC phase/cluster (BTC S2F will be 56 in 2020–2024) of $5.5T. This translates into a BTC price (given 19M BTC in 2020–2024) of $288K.”

Bitcoin's Hash Rate Continues to Surge

On May 11th, the third block reward halving in history occurred on the Bitcoin blockchain. A halving typically causes the hash rate to drop because it decreases the incentives miners by half, exclusive of fees.

A drop did happen, with Bitcoin's hash rate slipping from 121.038 million terahash per second (TH/s) to 90.471 million TH/s between May 11th and May 27th.

However, since late May, the hash rate has seen a V-shaped recovery and recorded a new all-time high on September 19th, now hovering at 139.905 million TH/s, over 15% higher than pre-halving levels, according to data from BitInfoCharts.

The surging hashrate despite the halving four months ago suggests that miners anticipate a higher Bitcoin price in the long term. 

Following Bitcoin's latest mining difficulty adjustment, the hash rate has continued to climb, as pseudonymous Bitcoin personality “Hodlonautnoted:

“Bitcoin difficulty adjusted +11.3% yesterday. Did miners shut their rigs down after this hit to profitability? Nah, so far on track for another +7.7%,."

Since the S2F model primarily relies on the hash rate and the fixed Bitcoin supply to predict the fair valuation of Bitcoin in the years ahead, the resilience of Bitcoin’s hash rate and the mining sector buoys the prospect of S2F.

The Fundamentals of Bitcoin are Strong

Analysts have also noted that the current hash rate trend further strengthens the overall fundamentals of the dominant cryptocurrency.

Marty Bent, the editor-in-chief of Marty’s Bent, said hash rate has been “pouring onto the network since the last difficulty adjustment.” 

“Upward adjustment of 11.3%[.] New difficulty all time high. The amount of computing power dedicated to protecting #Bitcoin continues to grow.”

written by

Joseph Young is a financial analyst based in South Korea. He has covered Bitcoin and the crypto market since 2013. He regularly contributes to the BTC Times, Forbes, and Cointelegraph.