Bitcoin (BTC) difficulty set its second-largest difficulty level ever on Tuesday, May, 5 as miners hold in line for the block reward halving expected in the coming week. As one of the most anticipated events of the year approaches, qualms that small miners may shut down following the halving are supported with the soaring difficulty rates.
BTC difficulty sets sights on ATH
Bitcoin’s difficulty adjusts every 2016 blocks balancing the competition for block rewards to ensure only about 144 blocks are mined each day. The difficulty adjustment soared towards all-time highs setting its second-highest difficulty at 16.1048 T since crossing the 16.5556 T mark on March 25th 2020.
Shortly after hitting its ATH, the difficulty dropped by 16% in its next adjustment and has since been gradually rising to current levels.
The difficulty adjusts higher or lower depending on how miners performed the previous week. The 0.92% adjustment spike in the difficulty follows last week’s abnormal rise hash rates that saw 16 blocks mined in an hour.
A bleak future for small miners
The mining hash rates – a measure of the energy required to mined Bitcoin blocks –set all-time highs in the past week, setting the current adjustment upwards. However, this paints a bleak future for small miners with the halving, whereby the block rewards will drop from 12.5 BTC to 6.25 BTC.
According to crypto analyst, Mati Greenspan, the hash rate will plunge following the halving given the current prices of BTC are not sufficient to be profitable for the current older generation ASIC miners.
John Todaro, head of research at TradeBlock, estimates the break-even price for BTC for miners to remain profitable will shoot up from ~7,000 USD (current levels) to $12,000 – $15,000 post halving.
Following the #bitcoin halving, miners' estimated breakeven costs will rise from ~$7,000 today to ~$12,000-15,000 per $BTC after. I would not be surprised if we see bitcoin prices rise above these levels so that miners remain profitable. https://t.co/BomDfD7j54
— John Todaro (@JohnTodaro1) February 10, 2020
With the old generation machines expected to go out of service and small miners capitulating post-halving, the hash rate will subsequently fall. On the reaction post-halving Mati said,
“The hash rate will probably come down quite a bit and two weeks later, the difficulty will be adjusted lower.”
Can BTC’s price rise above the current $9,000 level and set a profitable level for the miners post halving?