About 28% of Foundry USA Pool participants' capacity is located in Texas. What could this affect? And will it impact the value of cryptocurrencies?
A decrease in the hash rate has not had an impact on the market for a long time in terms of cryptocurrency values. Prices are driven by the confluence of supply and demand on exchanges.
A downturn in the hash rate (computing power) of the Bitcoin network affects the following issues:
- When the hash rate goes down, the overall computing power of the network declines, thus making the system more vulnerable to cyberattacks in which hackers can seize control of most of the power to manipulate transactions. A significant drop in the hash rate increases the risks of excessive centralization of mining in the hands of large pools.
- As the hash rate drops, the average transaction confirmation time on the network increases, as it takes more time to discover new blocks.
- Reducing the hash rate automatically lowers the difficulty of mining new blocks, making it more profitable. And with a decrease in the difficulty of mining profitability, the revenue of the miners who continue to operate increases.
This situation illustrates the vulnerability of mining infrastructure in Texas to weather conditions. Companies were probably not fully prepared for the cold snap. In February 2021, a massive ice storm hit Texas, causing widespread power outages. For this reason, many mining farms in the State were forced to completely shut down their rigs for several days. This led to a decrease in the overall bitcoin hash rate, but not as much as after the ban on mining in China in May 2021 and now.
At the same time, miners actively participate in programs to regulate the load on the energy grid, highlighting their responsible approach. At critical times (for example, during extreme weather conditions), the power grid operator can order a partial or complete shutdown of mining equipment for a period of time. Such programs help balance the grid load, preventing local failures or large-scale outages. This improves the overall reliability of the power supply system during critical periods.
Thus, the weather can really have a significant impact on hash rate. However, these are temporary glitches that do not yet threaten the stability of the bitcoin network. That said, Texas' infrastructure still needs an upgrade to withstand such extreme weather conditions.