All other stories about Bitcoin price forecasting or speculation are centered on the narrative that increased investment by institutions and hedge funds will create value and fuel the price rally. However, a less popular narrative is that of the impact of mining pool concentration on Bitcoin speculative bubbles and Bitcoin price.
In September 2019, the concentration of mining pools was at its peak and the price of Bitcoin fell more than 25% from $10,600 to $8,500 level in 6 months. With a drop in the concentration of mining pools, Bitcoin's dominance has fallen.
The timeline overlaps with the initial plans to launch Libra and Alipay's ban on Bitcoin-related transactions. However, in addition to these external factors, Bitcoin's price was affected by the concentration of mining pools.
On-chain analysts predict the price of Bitcoin based on market cycles or pre / post halving, however, halving events are closely linked to Bitcoin mining. The increase in mining concentration reduces mining profitability, reducing, in turn, the supply of Bitcoin to exchanges. Speculative bubbles are created just before each halving, and the concentration of mining is the key factor responsible for it. Based on data from Glassnode, in its recent report on the cryptocurrency mining industry, Tokensight shared the perception that the change in miners' income is similar to the trend for the entire network hash rate. And the price is considered a measure of the hash rate here. Represents the fee paid by the mining pool to purchase the miners' hash fee.
In June 20, the mining difficulty returned to the level of May 20, and each time the difficulty exceeds 14.5 T, prices increase to increase mining profitability and capture more miners, reducing mining concentration.
Observations of the price x hashrate chart highlight that the increase in hashrate leads to an increase in price. However, the latest increase in the hash rate added 45% to the price, the previous one added 122%. It is possible that external factors such as the ICO bubble influence it. There were several speculative bubbles along the way to + 45% and these can possibly be attributed to the corresponding hashrate and mining concentration.
The current mining difficulty is 17.39T and, with an average of 100 days, it has been rising steadily since July 2020.
Although this is an indicator that the price of Bitcoin may increase with an increase in mining profitability, the concentration of mining pools is not high enough to fuel speculative bubbles in the price of Bitcoin.