Bitcoin mining difficulty has peaked to a new all-time-high almost for the first time in three months when the bitcoin bull run started towards the end of October 2020. The low bitcoin mining difficulty throughout the bull run suggests that there was less pressure on miners as the rising price compensated for them.
— glassnode alerts (@glassnodealerts) January 23, 2021
Another factor attributed to the low mining difficulty in the recent past is being owed to a mining chip shortage in the market. China accounts for more than 60% of the bitcoin mining and as per reports, there is a significant shortage of new mining chips due to the pandemic. This has also led to a rise in the prices of bitcoin mining rigs in the second-hand market.
Lei Tong, managing director of financial services at Babel Finance, which lends to miners, explained the current crisis and said,
“almost all major miners are scouring the market for rigs, and they are willing to pay high prices for second-hand machines.”
“Purchase volumes from North America have been huge, squeezing supply in China.”
As Mining Difficulty Peaks Would Bitcoin Price Follow?
Bitcoin mining difficulty is a prime indicator of competition among miners to mine the next block, in the wake of the third block reward halving many miners were worried that they might have to give up mining as the price of BTC was hovering around $13k making it difficult to generate profit. However, as the price shot up mining difficulty eased, and mining through old rigs also became profitable thus cooling off the competition.
Bitcoin over the past three weeks has seen a break in its three-month-long bullish momentum with a couple of price corrections over 10%, taking its price below $30,000 for a short period. The top cryptocurrency is currently trying to regain the $32,000 price level. With the mining difficulty reaching new ATH, bitcoin price which has not seen much price action over the past couple of weeks might be gearing up for another price rally.