As Bitcoin price drops below $4k, even briefly touching $3,500, the hash rate of the bitcoin network took a beating as well resulting in the fall of Bitcoin mining difficulty as well. This time, difficulty drops 15 percent, the second-highest in the history after the highest in November 2011.
Bitcoin Mining Difficulty Makes Adjustment with the Price
This year saw a continuous ascent in Bitcoin mining difficulty until two months back when it started dropping down as shown in the chart below.
During the October month, Bitcoin price maintained stability around $6,500 mark but in the mid of November, prices fell down to $3,500 level.
During these last two months, as prices took a hit, Bitcoin miners shut down their rigs that resulted in the fall of hash rate and subsequently the mining difficulty.
Actually, every two weeks, the hashing difficulty algorithm of Bitcoin is adjusted in order to maintain the usual 10 minute block time. Since the prices took a hit in mid-November, it has been already adjusted twice. And as a result of this adjustment, the difficulty has been on a downward spiral.
Mining difficulty is adjusting itself to the falling price as recently stated by the CoinShares in its report on Bitcoin mining,
“Difficulty resets to a lower level and the all-in cost of mining falls to a level where it is again right below the price of bitcoin.”
Now, Bitcoin mining difficulty is seeing a fall of 15 percent which is the biggest one in the past 7 years. In the history of Bitcoin, this is the second highest drop after November 2011’s 18 percent fall.
Fernando Ulrich, the Chief Analyst at XDEX, shared the data on Twitter,
#Bitcoin just had its second largest drop in mining difficulty in history: -15.1%. This is the current ranking:
— Fernando Ulrich (@fernandoulrich) December 3, 2018
However, it is nothing of concern as one Bitcoin enthusiast Tweets,
re: mining death spiral
"Once the price hits <insert random number> miners will turn off their equipment and bitcoin will die"
Nope. That's the beauty of the difficulty adjustment. Every miner that is turned off increases the profitability of remaining miners.
— Matt Odell (@matt_odell) November 25, 2018
Another enthusiast comments,
“Largest decrease after one of the largest increases in its history. Just a correction to the mean, nothing more…. And it will all come back in due time, hardware is there, produced and ready to be plugged in, just not part of the current state of the network.”
Another one shared,
“In three of the previous instances, mining difficulty reductions happened in a bear market – like today. In ALL previous instances, the price of $BTC 3 & 12 months later was significantly higher. Although not as high as in bull market instances.”
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Having a background in writing, I worked on a wide array of industry topics and have recently entered the world of Blockchain and Cryptocurrency.