Bitrabo Editorial
As more miners join the Bitcoin network and existing miners deploy new mining rigs, the mining difficulty of BTC is expected to reach a new all-time high within the month. According to data from Coinwarz, a Bitcoin mining monitoring platform, there is likely to be another surge in mining difficulty in the coming weeks.
Bitcoin Mining Difficulty Increase: What Does It Mean?
The process of mining Bitcoin becomes harder as more miners join the network. The Bitcoin algorithm adjusts automatically to ensure that one block is mined every 10 minutes. When there are more miners competing, the difficulty goes up to make it harder to find a block.
The higher the difficulty, the more hash power miners need to solve blocks and earn BTC. As difficulty continues to increase over time, mining profitability declines. Miners will need to spend more energy and money on mining in order to maintain the same payout rate.
Mining difficulty rises to 52.35T | Source: CoinWarz
According to the Bitcoin difficulty chart, the difficulty is currently at a record high of 52.35 trillion hashes. However, this metric is expected to jump to 53.33 trillion hashes later this month around June 28, indicating a 1.78% increase. This will be the third jump in difficulty this month, as the price of Bitcoin continues to range and trend above the $26,000 range.
How Mining Difficulty Impacts The Price Of Bitcoin
The difficulty of Bitcoin mining directly impacts the profits of miners. However, some investors may correlate an increase in difficulty with an increase in the market price of BTC.
Mining difficulty is most efficient on the price of BTC when there is a Bitcoin halving. With higher mining difficulty and fewer block rewards, fewer BTC is being introduced into circulation.
BTC price retests $27,000 resistance | Source: BTCUSD on TradingView.com
The increasing difficulty and reduced block reward signal lower future supply growth, which investors see as a bullish sign that frequently sparks buying interest in the market. According to the BTC halving schedule, the block reward is cut in half roughly every 4 years.
However, the price of Bitcoin is highly volatile and influenced by many factors, so there is no guarantee of a price increase following a jump in mining difficulty. For miners and investors alike, increasing mining difficulty means gearing up for the next stage of Bitcoin’s growth cycle. It shows that the entire network is growing and becoming more secure.
As mining difficulty rises, the security of the blockchain also gets stronger as more miners secure the network. The decrease in incoming supply coupled with the increased security signals to investors that it is a good time to buy BTC, which leads to a surge in price. Therefore, a rise in mining difficulty and the upcoming halving can be a very bullish event for the cryptocurrency.
Featured image from iStock, chart from TradingView.com