Why Bitcoin Hash Rate and Mining Difficulty Headed Higher is Great News for Bulls
The difficulty of mining a bitcoin block has increased by around 10% during the latest adjustment, suggesting that more miners are coming back online as prices continue to recover.
The adjustment at block height 772,128 is the biggest downward change since October 10, 2022, when the metric rose by 13.55%, data from mining pool BTC.com shows. More specifically, the difficulty has climbed to 37.59 trillion from the previous 34.09 trillion.
“Bitcoin mining difficulty increased by 10.26%, to an ATH!" mining pool f2pool said in a tweet following the adjustment. "In this 2-week cycle, If BTC can go up above $23,000, machines that are more efficient than 40W/T can be running with profits at the electricity of $0.08/kWh.”
The Bitcoin mining difficulty is a measure of how difficult it is to mine a Bitcoin block, or in more technical terms, to find a hash below a given target. A high difficulty means that it will take more computing power to mine the same number of blocks, making the network more secure against attacks.
Historically, a higher network difficulty is accompanied by a period of higher prices. In contrast, plunging BTC prices sometimes force miners to go offline as it becomes unprofitable, which in turn leads to a drop in mining difficulty.
The latest increase in difficulty comes as Bitcoin broke above key resistance levels over the weekend and extended its rallies. The world's largest cryptocurrency has passed the $21,000 price mark at one point over the past day and is currently trading around $20,800.
Last year was one of the worst on record for the crypto sector, with over a trillion dollars in value wiped out from the market. Rising interest rates as well as exacerbating worries of an economic downturn further attributed to slumping prices.
The overall bad market conditions also impact crypto mining pools. As reported, Core Scientific, one of the largest Bitcoin mining companies, filed for bankruptcy in December last year amid plunging cryptocurrency prices and skyrocketing energy costs.
In the court filings, Core Scientific said that it had suffered a net loss of $434.8 million for the three months ending September 30, 2022, and had just $4 million in liquidity at the time of its bankruptcy filing.
Aside from Core Scientific, other crypto mining firms are also struggling amid the market downturn. Argo Blockchain, Iris Energy, and Greenidge Generation are among the more notable Bitcoin mining companies to face financial issues.