It seems that the difficult market conditions are once again affecting the Bitcoin (BTC) ecosystem. Namely, the difficulty of BTC mining has dropped by the largest margin since July 2021.
Bitcoin network difficulty
Difficulty adjusted by 7.32% on block height 766,080. At the same time, this coincided with a decrease in the average hash rate from over 264 EH/s to approximately 245 EH/s.
The difficulty of the Bitcoin network is automatically adjusted according to the amount of hashing power available to the network. In practice, this boils down to the rate at which new Bitcoin blocks are added to its blockchain. This is adjusted to an average of 10 minutes on the Bitcoin network.
In addition, the difficulty level is adjusted every 2,016 blocks. These blocks are mined in about 2 weeks, so this difficulty level will last at least 2 weeks. It is currently unknown whether there will be a fall again, or whether it will rise again.
BTC miner revenues declining
In the 3rd quarter of this year, the cost of producing new BTC was significantly higher than in previous years. The main reason for this is the worldwide rising energy costs. The global chip shortage has also contributed to this.
Then, revenues for Bitcoin miners also fell to a 2-year low at the end of November, exacerbated by the current crypto market performance.
This eventually led to several miners having to (temporarily) shut down their activities, leading to a recent drop in hash rates, which explains the latest difficulty adjustment. Mining analyst ‘Jaran Mellerud’ also believes that rising energy prices are the main culprit for the drop in hashrate. Mellerud said the following in conclusion:
Many miners are currently close to breaking even in cash flow and will be forced to shut down their machines if market conditions deteriorate further.