Bitcoin Difficulty Adjustments Leads To Rebound In Hashrate

Data shows the latest downwards adjustment in the Bitcoin mining difficulty has lead to the hashrate observing a bounce back up.

Bitcoin Mining Hashrate Observes Surge During Last Couple Of Weeks

According to the latest weekly report from Arcane Research, the hashrate has risen up following the largest decrease in the mining difficulty in one year.

The “mining hashrate” is an indicator that measures the total amount of computing power connected to the Bitcoin network.

Higher values of the metric usually result in faster performance of the blockchain and a larger degree of decentralization of the individual machines leads to stronger security.

The hashrate can also be thought of as a representation of the competition between the individual miners. Thus, more is the indicator’s value, higher is the competition that miners face.

A feature of the Bitcoin network is that it tries to maintain a constant “block production rate” (which basically means it attempts to keep the transactions per day fixed).

However, when the crypto’s hashrate fluctuates, so does the block rate. For example, if some miners disconnect from the network, the rate of hashing transactions slows down and fewer than needed blocks are mined.

To counteract this, what the blockchain does is that it decreases the “mining difficulty” of the network so that miners find it easier to solve their computing puzzles and hash transactions closer to the desired rate.

Now, here is a chart that shows the trend in the 7-day average Bitcoin mining hashrate over the past year:

The value of the metric seems to have observed some rise in recent days | Source: Arcane Research's The Weekly Update - Week 30, 2022

As you can see in the above graph, the Bitcoin mining hashrate had been going down for a while, until around two weeks ago.

Due to this constant downtrend, the network difficulty saw three consecutive negative adjustments, the latest of which was the largest such change since one year ago.

The reason behind the declining hashrate was the diminishing returns for the miners, caused majorly by the BTC price plummeting down this year.

But since the difficulty has observed a significant drawdown, the hashrate has jumped back up a little. This is because a lower network difficulty results in higher revenues for miners.

However, the block production rate has now surged up to higher than required, so the next adjustment is expected to bring with it a higher difficulty for the miners again.

BTC Price

At the time of writing, Bitcoin’s price floats around $23.3k, up 9% in the past week.

Looks like the value of the crypto has been mostly consolidating sideways during the last few days | Source: BTCUSD on TradingView

Featured image from Dmitry Demidko on Unsplash.com, charts from TradingView.com, Arcane Research