Bitcoin Difficulty Reaches New Peak: What This Means For The Market

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Data shows the Bitcoin mining difficulty has set a new all-time high recently, here’s what it may mean for the market.

Bitcoin Mining Difficulty Has Made A New All-Time High

According to the latest weekly report from Arcane Research, while BTC’s price has continued to struggle, the mining difficulty has seen growth and hit a new ATH.

The “mining difficulty” is a measure of how hard it is to find a valid block to mine. After every 2016 blocks, the Bitcoin network adjusts its difficulty based on the current block production rate.

A relevant indicator here is the hashrate, which measures the total amount of computing power that’s currently connected to the BTC blockchain.

As the value of this indicator rises, miners are able to produce blocks at a faster rate than the crypto is programmed for. The network then increases the difficulty to counteract this rise in the hashrate.

On the other hand, if the metric decreases in value, the production rate becomes slower than needed, and the difficulty is then automatically also lowered.

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Now, here is a chart that shows the trend in the BTC mining difficulty over the past year:

Looks like the difficulty of the coin has been rising up for a while now | Source: The Arcane Research Weekly Update - Week 3

As you can see in the above graph, the Bitcoin mining difficulty had crashed down back in June as a result of China’s crackdowns. Since then, the indicator has been rising up, and has now made a new all-time high.

The price of the crypto, however, peaked back in November, and since then has crashed down almost 50% in value.

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The report expects the mining hashrate to continue to rise in the near future. This means that difficulty will also keep on going up, leading to smaller profits for miners.

During bull runs, any rises in the hashrate don’t affect miner profits much as the Bitcoin they mine goes up in value, making up for any lost revenue due to the difficulty.

But since the BTC price has been declining recently, miner profits will continue to shrink. Because of this, mining stocks that performed so well during 2021, would find it hard this year.

BTC Price

At the time of writing, Bitcoin’s price floats around $46.7k, down 13% in the last seven days. The below chart shows the trend in the value of BTC over the last five days.

Bitcoin Price Chart

BTC's price has erased some of the recovery it made over the last few days | Source: BTCUSD on TradingView
Featured image from, charts from, Arcane Research

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