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Bitcoin Mining Difficulty Will See A Huge Increase – Here’s What It Means For BTC Price

zycrypto

5mon ago

Within the next few hours, bitcoin’s mining difficulty will increase by almost 9 percent. The increase is expected to be one of the largest difficulty increases the bitcoin network has ever experienced in any two-week period and could affect bitcoin’s price.

Bitcoin difficulty is a measure of how hard it is to find blocks below a given threshold. BTC’s mining difficulty adjusts every 2016 blocks (or after 2 weeks at 10-minute blocks) depending on the mining difficulty of the previous 2016 blocks. An increase in the mining difficulty suggests that the previous difficulty was low, hence the imminent increase.

Tuesday's difficulty adjustment will be epic! pic.twitter.com/NZQ0xBppDd

The mechanism of bitcoin difficulty adjustment is a stroke of genius. It involves striking an economic balance between mining costs and profits for miners. In other words, the mining difficulty adjusts itself either up or down depending on the market conditions and the number of miners on the network. This way, miners are able to secure the network without overproducing or being forced to shut down their rigs.

Bitcoin’s difficulty currently stands at 13.79 trillion, according to data provided by monitoring resource Blockchain.com. After the adjustment on Tuesday, January 14, it will increase by almost 9 percent to 15 trillion, making it harder for miners to solve algorithms and subsequently mine blocks. This is notably a huge adjustment considering that the difficulty normally reconfigures itself by 1-2% percent on average.

Moreover, this difficulty increase reflects a high hash rate which is consistent with higher revenues for miners, which depend hugely on the prices. Since January 1, 2020, BTC’s hash rate has been rising and hit a new all-time high of around 120 TH/s on January 6. A combination of higher hash rates and higher difficulty makes it harder for miners to make nice profits using current mining equipment. This will be exacerbated by the halving of the mining rewards coming in less than five months.

This mining difficulty adjustment comes at a time when BTC bulls are attempting to give bitcoin new life. After consolidating just above $8K for a couple of days, BTC recently blew past $8,500, marking an eight-week high. The top crypto has gained 17.4 percent since January 1, despite a slow start to 2020.

The mining difficulty increase and the high hash rate, though non-price metrics, indicate the overall good health of the network. The convergence of these network factors and bullish technical indicators all seem to suggest that the ongoing rally could only be getting started.

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