Bitcoin Mining Difficulty Drops during Crypto Price Slump, Expected to Rise Again – Decrypt

Mining Bitcoin has become easier in recent weeks due to the drop in crypto markets, but experts believe this trend won’t last.

The network’s difficulty decreased from over 114 trillion to 110.5 trillion on Sunday, as shown by data provider CoinWarz. This decline coincides with a decrease in Bitcoin’s price, which has plummeted below $83,000 on Wednesday afternoon for the first time since early November, according to CoinGecko.

During bear markets, mining difficulty typically decreases as companies reduce mining capacity to save energy. The recent drop is also attributed to high energy prices due to a cold winter in the U.S.

In times of market growth, the mining network expands, leading to increased difficulty. Difficulty has historically increased as the network requires more computing power and energy, indicating improved security.

“Elevated energy demand in the U.S. due to winter conditions is driving up mining operation costs,” explained Nick Hansen, CEO of Luxor mining pool. He noted that higher energy costs and price drops are causing some mining operations to reduce activity.

Bitcoin mining reset

Curtis Harris, senior director at Compass Mining, believes the recent decrease in mining difficulty signals a reset as miners adjust to Bitcoin’s slump and manage energy costs and hardware constraints.

Mining difficulty reached record highs in January when Bitcoin’s price surpassed $108,000. Miners often benefit from temporary decreases in difficulty as operations become more profitable.

Ro Shirole, chief business officer at BlockMetrix, stated that while the network shrinkage benefits miners, the price drop has outpaced this benefit, causing miners to only briefly celebrate the decline.

Bitcoin’s mining difficulty adjusts every 2,016 blocks processed, approximately every two weeks. The current difficulty of 110.5 trillion signifies that mining the asset is 110.5 trillion times harder than when mining first began in 2009.

However, Scott Norris, CEO of Optiminer, predicts that the recent decline in difficulty is temporary, as North American operations expand, leading to network growth.

Edited by James Rubin