Bitcoin’s mining difficulty — a metric for the ease by which miners can create new transaction blocks on the network – increased by nearly 15% on Tuesday. The jump represents the biggest upwards move of its kind since January 2018.
June 17 2020 | AtoZ Markets – Two weeks ago, the difficulty rate of Bitcoin mining adjusted itself to accommodate many more miners. The algorithm for BTC mining is such that it auto-adjusts every two weeks.
After the third halving, several miners turned unprofitable. Therefore, many miners moved out of the network, causing a capitulation in the Bitcoin Hash Ribbons.
Bitcoin mining difficulty sees a huge 15% increase
The BTC mining difficulty rate increased by over 14.95%, which happens to be the highest increase since January 2018. It will cause several miners to shut down their systems and move out of the network.
It is because many miners use old systems to mine. The newer machines with higher computational power easily outshine the ancient ones. It forces several Bitcoin miners to become obsolete.
The BTC mining difficulty adjusts after every 2016 blocks of Bitcoins mined. It happens so that the time required to mine remains roughly around ten minutes. The adjustment takes into account the following parameters:
- number of miners participating in the network
- The time needed to solve a complex problem to mine a block
The last drop in the Bitcoin mining difficulty level caused a massive influx of miners to join the network. As soon as the miners felt they could bag profits, they rushed to their old ways.
How does mining difficulty affect BTC prices?
Below is the BTCUSD daily timeframe, and the lower part of the chart shows the capitulation in the Bitcoin Hash Ribbons.
Any investor will want to know the implications of the mining difficulty change if it affects the Bitcoin prices. There are a couple of ways to look at the transformation:
- First, Bitcoin mining might become concentrated at the hands of the more endowed and wealthy miners. It could cause a decrease in the Hash Rate and therefore create a capitulation.
- Second, a lot of miners are now ‘Hodling’ the Bitcoins, they mine. It could cause an unhealthy accumulation within the hands of a few over a while.
Some miners would then have the power to swing Bitcoin prices as per their will. However, the rate will auto-adjust in another two weeks, and probably more miners would re-enter the network!
What do you think of Bitcoin’s increased difficulty adjustment? Let us know in the comments!