In the world of cryptocurrencies, the mining difficulty metric has a substantial impact on price. Recently, the Bitcoin mining difficulty grazed an all-time high of 55.62 trillion hashes, based on data obtained from CoinWarz. It’s crucial to understand that the mining difficulty is readjusted every two weeks, or post-mining 2,016 blocks. Conversely, this block duration is christened as epochs with the intention of each block taking about 10 minutes to mine.
In a scenario where mining activity swells during an epoch leading to a reduction in the average time to mine a block below the aimed 10-minute mark, the network scales up the mining difficulty. Similarly, if the block mining time exceeds 10 minutes, the difficulty level is inadvertently decreased. The sky-high mining difficulty of Bitcoin is proportionally linked to the climbing computational supremacy of Bitcoin’s network, thanks to an influx of miners eager to partake in Bitcoin’s network issuance (6.5 BTC per block) coupled with transaction fees.
Interestingly, the network’s hash rate, or computational power measure, reached a pinnacle of 414 TH/s earlier this month, as per Blockchain.com data, marking a boost of above 60% since the onset of the year. Crypto analysts at Bitfinex have reasoned out why the rising Bitcoin mining difficulty could result in a price surge. With the current prices suggesting a dip in Bitcoin’s value, miners are encouraged to invest more resources into mining as it could rake in significant profits. This is so because miners predict a rebound in Bitcoin’s price, which they perceive as a downward deviation from its actual value.
Additive to this, miners are pivotal Bitcoin holders who, upon the prophecy of rising prices, could curtail supply from the key segment of the Bitcoin market. Nevertheless, Bitcoin is projected to conclude August with a decrease of beyond 10%, statistics unheard of in the current year. The last known price was around $26,000, and the price encountered headwinds attributed to rising US yields and plummeting US stock prices as well as technical selling after it fell beneath its 2023 uptrend and 200DMA.
Despite these setbacks, optimists predict a rebound owing to upcoming spot ETF approvals expected to propel institutional adoption in 2024, the impending Bitcoin halving event, and a conceivable Federal interests rate cut in the second half of 2024. Notably, Bitcoin has a precedent of reaching new all-time highs within a year of halving, and the next one is around the corner in April 2024. This would signify a nearly 3x uptick from current price levels, which might instigate Bitcoin miners to double down on their investments.
Source: Cryptonews
