The fluctuation of the hashrate in Bitcoin (BTC) is tied to the inflation rate, explains an analyst from Compass Mining

Compass mining, who claims to be the first and largest online marketplace for Bitcoin mining hardware and hosting, has commented on the relationship between the hash rate of BTC and the issuance rate of the leading cryptocurrency.

According to mining analyst Mitch Klee, the inflation rate is “tied to hashrate fluctuations”.

Klee noted that the difficulty adjustment “ensures that the block interval averages ten minutes”. He explained that when the hashrate (or the amount of computing power that the Bitcoin network backs up) “drops dramatically, the block interval slows, resulting in lower inflation”.

Klee added that Bitcoin “not only mines a static number of Bitcoin per hour, but is calculated in each block to mine a certain number of Bitcoin”. But the blocks can “come faster and slower depending on the hashrate fluctuation,” he added.

Klee further remarked:

“Bitcoin is currently mining 6.25 Bitcoin per block. If new blocks come in every ten minutes (600 seconds) this is currently around 1.8% inflation. But this exact inflation percentage changes regularly due to short-term fluctuations in the hashrate. “

There are “some correlated falls in Bitcoin’s inflation rate and hashrate,” Klee added, while noting that “it can be safely said that a rapid fall in hashrate leads to a short-lived fall in inflation.”

However, Klee questions why this is happening.

He explained:

“Simply put, the difficulty adjustment keeps the number of blocks mined at an average rate of 10 minutes (600 seconds). But this difficulty adjustment only adjusts every 2016 block. Since the has rate drops dramatically in a difficulty period, you can see a significant increase in the block interval. The block interval is the number of seconds between the individual blocks. “

He also mentioned:

“When ASICs were first deployed in 2013, there was a rapid and steady increase in hashrate. It was consistently a higher hash rate than the difficulty adjustment could handle, which resulted in a lower average block interval and eventually slowed down enough for the block interval to adjust. “

Klee added that “Bitcoin’s inflation will not be affected too much in the long run outside of the short-term inflation rate, and after the next halving, Bitcoin’s inflation rate will be below 1%.”

Klee made it clear that “there are still only 21 million Bitcoin and by December 2021 90% of all Bitcoins have been mined and are only getting scarcer”.