Bitcoin mining difficulty dropped 11.16% in the latest network adjustment in the last 24 hours, marking the biggest decline since China’s 2021 crypto mining ban. The decrease signals weaker market conditions, falling hashrate activity, and disruptions to U.S.-based mining operations.
The adjustment occurred at block 935,429, lowering difficulty to 125.86 trillion, according to data from CoinWarz. Average block times have stretched beyond 11 minutes, missing Bitcoin’s standard 10-minute target.
Source: CoinWarz
Coinwarz also predicts that there will be another decrease of approximately 10.4% on February 23rd. This would bring the mining difficulty to 112.7 trillion, assuming the present trend continues.
The previous comparable decrease in mining difficulty happened in mid-2021 when China banned cryptocurrency mining. This resulted in a series of decreases in mining difficulty as mining companies moved their operations to other countries.
Why Mining Difficulty Decreased
There were two primary reasons why the mining difficulty decreased. First, the general downturn in the crypto markets has negatively affected miners’ profit margins.
Second, a recent winter storm passed through most of the United States. This reduced the availability of electricity and resulted in some mining operators shutting down temporarily or reducing their operating levels.
Winter Storm Fern was a severe winter storm that passed through the United States in January. It caused widespread power outages and reduced operations at several mining facilities. Hence, the leading Bitcoin mining pool, Foundry USA, experienced a loss of almost 60% of its hashrate due to the storm.
As a result of the storm, Foundry USA’s total hashrate went from approximately 400 EH/s to around 198 EH/s. After the storm, Foundry USA’s hashrate recovered to greater than 355 EH/s and remains the dominant player in the global Bitcoin mining market, controlling close to 29.5%.
Source: Hashrate Index
Also Read | Bitcoin Stabilizes at $68,000 as ETF Outflows Trigger Crypto Rebound
Industry-Wide Effects
In addition to the effects of the winter storm, the mining industry faces a number of structural challenges. Some mining companies are diverting resources away from Bitcoin mining towards AI data centers and high-performance computing, which provide better profit margins at this point in time.
The overall Bitcoin network hashrate reached a four-month low in January, indicating that the trend of diverting resources away from Bitcoin mining is continuing.
Lower mining difficulty may represent a short-term advantage for the remaining miners, because they will find and receive block rewards more easily. However, if the difficulty continues to decrease, it indicates long-term strain in the mining sector and a continuation of negative market conditions.
Source: Hashrate Index
Why This Is Important
Decreasing mining difficulty shows that the Bitcoin network is under significant economic pressure and that miners are struggling to remain profitable in the current market conditions.
Also Read | Bitcoin (BTC) Weekly RSI Hits June 2022 Lows as Sell-Off Deepens
