Investigation of the effect of Bitcoin blockchain hashrate on Bitcoin price

Abstract

As the influence of cryptocurrencies continues to expand globally, understanding the dynamics affecting Bitcoin price becomes increasingly crucial. This study aimed to explore whether the Bitcoin blockchain hashrate – the network’s computational power – influences Bitcoin’s price. A detailed literature review evaluated and contrasted various scholarly perspectives on the topic. The study employed a Vector Auto-Regression (VAR) model, utilizing secondary data from data.nasdaq.com spanning 2017 to 2023 (May). Contrary to some assumptions, results indicated that the Bitcoin network hashrate does not directly influence Bitcoin’s price. Moreover, the study found insufficient statistical evidence to suggest that Bitcoin’s price significantly affects the network hashrate. These insights offer valuable implications for investors, cryptocurrency miners, financial institutions, and policymakers as they navigate the implications of cryptocurrencies on the global economy. Furthermore, this study contributes to the broader discussion on blockchain networks and cryptocurrency price valuation, enriching the understanding of Bitcoin price determinants.