The process of mining Bitcoin has become more manageable in light of the recent downturn in crypto markets, although industry experts believe this trend may not persist.
Recent data from CoinWarz indicates that the network’s mining difficulty decreased on Sunday from over 114 trillion to 110.5 trillion. This decline parallels a significant drop in Bitcoin’s value, which fell below $83,000 on Wednesday afternoon for the first time since early November, according to CoinGecko.
It is common for mining difficulty to decrease during bear markets. As asset prices decline and demand diminishes, some companies may reduce their mining capabilities by taking equipment offline to save on energy costs. The latest reduction in difficulty is occurring amid a harsh winter in many regions of the U.S., which has heightened energy prices.
In times of market prosperity, the mining network expands, leading to increased difficulty. Throughout Bitcoin’s 16-year history, difficulty has surged as the network has required greater computing power and energy. This metric is crucial, as increased difficulty signifies a growing level of security for the network.
Nick Hansen, CEO and co-founder of the Luxor mining pool, mentioned, “Decrypt, “The current energy demands nationwide are elevated due to winter conditions, which results in higher prices for mining operations.”
He noted that a “combination of increased energy costs and a general price drop” is compelling some mining operations to reduce their outputs more than usual.
Bitcoin Mining Reset
Curtis Harris, senior director of growth at Compass Mining, remarked that the recent “slight pullback could indicate a reset as miners adjust to” Bitcoin’s downturn, “while balancing energy expenses, infrastructure limitations, and slower deployment of next-generation hardware.”
January saw mining difficulty reach record highs when Bitcoin hit a new all-time high price exceeding $108,000.
Miners, who are large networks of computers that earn BTC rewards for validating transactions on the blockchain, often welcome short-term decreases in difficulty as it makes operations more manageable and profitable. However, the substantial drop in BTC prices complicates this advantage, according to Ro Shirole, chief business officer at BlockMetrix, who shared insights with Decrypt.
He explained, “While the network contracting benefits miners, the price decline has outstripped the percentage of network contraction,” adding that miners’ satisfaction lasted for “only about five minutes.”
Bitcoin’s mining difficulty is recalibrated after every 2,016 blocks processed, approximately every two weeks. A difficulty of 110.5 trillion means it is now 110.5 trillion times more difficult to mine BTC than when the first block was mined in 2009.
However, the recent decrease in difficulty is not expected to last, according to Scott Norris, CEO of independent Bitcoin miner Optiminer, who explained to Decrypt that North American operations are set to expand, leading to a growth in the network.
“While miners can relish this short-term adjustment,” he stated, “it’s on the verge of increasing again.”
Edited by James Rubin
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