Bitcoin
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has been on an impressive upward trend, discounting minor fluctuations for the better part of the last two months. When Donald Trump won in August, prices broke above $70,000, surpassing the 2021 highs, and within days, the $100,000 milestone was within reach. It was a historic achievement.
As Bitcoin continues to hold above this psychological level, something else is unfolding—something entirely expected. One analyst has observed a steady increase in Bitcoin mining difficulty since August last year.
Starting from August 2024, mining difficulty has been actively increasing, with quarterly difficulty changes rising from negative values to +24%.
This indicates that miners are actively deploying new equipment, which boosts the overall network hash rate. Essentially, this… pic.twitter.com/uVfsMl9TLh
— Axel
Adler Jr (@AxelAdlerJr) January 21, 2025
This means mining Bitcoin (BTC) has become harder for miners, and the quarterly difficulty adjustment has shifted from negative to approximately +24%. Many in the industry anticipated this rapid shift.
In early August, Bitcoin prices dipped, breaking below $50,000 and bottoming up at $49,000. Many thought the fairytale rally from 2021 had come to an end.
However, momentum shifted rapidly from then onwards, allowing Bitcoin to reclaim and solidify its position above $55,000 and $60,000. This recovery coincided with an impressive expansion in mining difficulty.
Bitcoin Mining Difficulty: A Mark of Bitcoin’s Strength
Changes in Bitcoin mining difficulty often correlate closely with price movements. When prices rise, mining becomes more challenging as miners dedicate more resources to maintain a consistent flow of coins.
This mechanism is exactly how Satoshi Nakamoto designed the network.
Mining difficulty prevents the network from dispensing 3.125 BTC every 10 minutes or so without adjustment. As of January 22, mining difficulty reached a new all-time high of 110 trillion.
(Source)
Whenever mining difficulty increases, farms require more computational resources and energy, leading to higher operational costs.
The silver lining for ordinary users is that, as long as miners remain active, regardless of spot prices or difficulty, the Bitcoin network remains stable and secure, ensuring seamless value transfers at any time.
And for this, the mainnet rewards them for their efforts via block rewards and block fees.
Difficulty, Hash Rate, and Profitability
From how Bitcoin is designed, adjusting in response to price changes is difficult. A price spike often signals higher network demand, which drives up difficulty.
Since the network recently halved mining rewards, mining farms are now allocating more resources and streamlining operations to maintain profitability. More of their revenue will come from transaction fees rather than block rewards in the coming years.
Despite the record mining difficulty and reduced block rewards compared to last year, miners are currently highly profitable, perhaps because only a few major mining pools and farms operate now.
Mining is currently dominated by a handful of mining pools, with Foundry USA and Antpool leading the pack and collectively contributing over 50% of the total hash rate.
(Source)
According to Glassnode data, the average cost of mining a single Bitcoin is less than $35,000, compared to the $105,000 spot price on exchanges like Binance.
(Source)
Every halving cycle flushes out weaker miners. Although this may temporarily reduce the hash rate—as seen in April 2024—it typically recovers steadily over time.
(Source)
Currently, the hash rate mirrors the rising difficulty, standing at 786 EH/s, slightly below the all-time high of 817 EH/s.
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The post Bitcoin Mining Difficulty at Record Highs, but Miners Score Coins at a 300% Discount appeared first on 99Bitcoins.
