The decline in the Bitcoin hash rate led to the adjustment in mining difficulty. The price of Bitcoin remains on the rise and opens opportunities for less efficient miners.
Bitcoin’s mining difficulty recently fell by about 18%, being the second largest in the history of the pioneering cryptocurrency in the era of ASIC miners. It had previously dropped by 18% in October 2012, according to estimates from various sources.
CoinMetrics shows that the period between the last two Bitcoin mining difficulty adjustments lasted a little more than usual. They note that the block confirmation time remained above the 13-minute wait in October. It caused it to last 24,024 seconds (about 16 days + 18 hours) “in the most recent difficulty adjustment period.” This represents 19.2% more than the average block confirmation time, inserted in Bitcoin’s design based on of 10 minutes.
According to the mempool.space website, the average transaction fee exceeds 280 sat/vB (equivalent to USD 5). Likewise, the website indicates that the total size of the mempool weighs of 107 MB, with 69,700 pending transactions. This moderate level of congestion still keeps transaction fee prices high, compared to lighter periods.
The mining difficulty is an estimate of the effort that it takes to mine Bitcoin. It undergoes regulation about every 2 weeks, depending on the hash rate available. The current mining difficulty is at 16.5 T, according to data from Coinwarz.
Hash Rate and Mining Difficulty Drop, but Bitcoin’s Price Increases
A sharp decrease in the Bitcoin hash rate has preceded the variation in Bitcoin’s mining difficulty for 15 days. Besides, there has been congestion on the network and a general increase in transaction fees.
The current migration of miners in China to more affordable energy sources could have caused the decline in the Bitcoin hash rate. At the end of the rainy season in Sichuan, cheaper hydroelectric power is no longer available. For that reason, miners choose to use other sources, such as coal and other types of fuel.
However, this decline in mining difficulty and hash rate seems not to have affected Bitcoin’s remarkable rise in price. Less efficient miners could obtain attractive profit margins, as long as mining hash rate and difficulty do not increase.
During the last difficulty adjustment on October 17th, Bitcoin maintained an average price of USD 11,500. At the time of writing this article, Bitcoin is trading at USD 13,500, according to data from CoinMarketCap. This represents an estimated 18% appreciation in global markets over the prior period.
The current profitability of Bitcoin mining remains well above the average of the previous months. This has been the most profitable moment to mine Bitcoin this year, after the reduction by half of the reward per block, which occurred in May.
Considering that this adjustment has its origin in the migration of miners in China, this window could not remain open for long. It would be a matter of days before they install the equipment and start working with it again. Without a doubt, this would bring at least a new adjustment in mining difficulty, as well as an increase in the hash rate.
By Alexander Salazar
