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Market Updates

Bitcoin Difficulty: 20% Slump Expected

Overview:

  • Bitcoin looks stronger again, the traded price is over $ 36,000
  • Bitcoin Mining in China Creates Uncertainty Across the Sector
  • Further Slump in Bitcoin Difficulty Expected, this Time 20 %

Earlier this month, there was an order from the Chinese government to stop all Bitcoin mining activities.

That led to a sharp drop in hash rate and difficulty, which determines how difficult it is to mine a Bitcoin.

On-chain data now suggests that there may soon be the biggest drop in difficulty in Bitcoin’s history.

Bitcoin Difficulty will continue to decline in the short term

hashrate
Bitcoin Hashrate, source: Blockchain.com

Bitcoin investors have once again experienced a roller coaster ride in recent weeks. Just one ATH at $ 64,000, the next moment already below $ 30,000, always accompanied by bearish, bullish, then again bearish news for the market.

As TheBlock reported, the Bitcoin difficulty could soon experience its biggest slump if it is adjusted again. The Difficulty describes the level of difficulty for miners to find a specific block and thus mine Bitcoin. On-chain analysts expect the coming slump at block 689,472 to be over 20% in about four days. So far, the largest falls have been 5 and 16 % (May 30, 2021 and June 14, 2021).

The Difficulty adjusts itself every 2016 blocks based on the total hash rate fed into the network by the miners. Ideally, it takes 10 minutes to mine a Bitcoin block. If this time is undercut, the difficulty is automatically increased. However, if many miners go offline, it would theoretically take longer than 10 minutes, so the Difficulty to mine a new block is shut down.

The average hash power dropped from 142 exahash/second on June 14 to just under 100 exahash/second. This slump came mainly from the shutdown of mining facilities in the Chinese provinces of Xinjang and Sichuan, formerly the strongest mining areas.

China Crackdown: Thousands of ASIC Miners Shut Down

Mining Rig in Close-up

Earlier this month, a bad news for the Bitcoin community came as the Chinese government announced it was halting mining activities in Xinjang and Sichuan. Since then, the hash rate of the network has dropped significantly and is about 50% below the previous month’s figure. It is interesting that many miners allegedly want to keep their ASICS and sit out the situation. They expect the Chinese government to change its mind again.

An incredibly large number of ASIC miners have been dismantled and are now being sold, or simply transferred to other mining sites. The market for used ASIC miners is just so flooded that the manufacturer Bitmain was forced to stop regular orders for the time being. It will now be exciting when it comes to the question of where the miners will settle next and how the hashrate will develop in the short term.

Conclusion: a setback yes, but not the end

In the short term, it is certainly a setback for the Bitcoin network, however, it does not mean the end. On the contrary, perhaps you can also gain something positive from the whole thing. After all, it has always been a central point of Bitcoin critics, who criticized the strong concentration of hashpower in China. Now there is a chance for a sustained redistribution of these, as the miners who had to switch off their equipment in China will now settle elsewhere.

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