Bitcoin mining difficulty could drop by 10.25% on Thursday and it may be an ominous sign that BTC price will drop. It will be the most significant downward adjustment since the halving event.
June 4 2020 | AtoZ Markets – Historically, major decreases in mining difficulty have been followed by drops in Bitcoin’s price, as seen on May 20 when difficulty reduced by 6%. BTC could have more room to fall as mining difficulty drops for the second time since the halving.
Bitcoin mining difficulty could drop today by 10.25%
Bitcoin mining difficulty adjustments happen every 2016 blocks, or every two weeks. The adjustment determines how much effort miners need to confirm transactions before they add them to the blockchain.
Bitcoin’s difficulty level could decline by as much as 10.25% in today’s adjustment — potentially causing further tanking of Bitcoin’s price.
According to Sasha Fleyshman, a trader at investment firm Arca, today’s adjustment “would be the second straight downward adjustment in a row,” since the May 11 Bitcoin halving.
Short term correction
Historical charts show that wild swings in mining difficulty have always resulted in short term downtrends in Bitcoin price. It means that the flagship cryptocurrency is likely to decline in the coming days as miners find it easier to mine BTC.
A decline in difficulty levels gives mining pools with the most advanced mining rigs the opportunity to increase their mining efficiency, pushing out miners with less efficient machines.
Such a case is known as capitulation and was responsible for a price plunge in December 2018. In that year, the price levels dropped consecutively three times by 7.39%, 15.13%, and 9.56%.
Bitcoin also declined from highs of $9,525 per bitcoin to lows of $8,600.
If big miners use their mining muscle to push those inefficient rigs off the network, a sell-off could ensue that miners look to cash in on their holdings. If that has already happened, then any moves on the descending channel may not result in very big drops.
The market is therefore likely to keep an eye on the next moves. At the time of writing, Bitcoin price is trading above $9,600 after falling from levels above $10k reached on Monday.
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