24 Jul 2022

The bitcoin mining difficulty is decreasing at its fastest rate in one year

Last week Bitcoin reduced its mining difficulty by 5% - its largest downwards difficulty adjustment in one year. The difficulty is now down 11% from the peak in May.
Source: CoinMetrics, Hashrate Index
The chart shows that the difficulty measures how much electricity is required to mine bitcoin. The higher the difficulty, the longer an ASIC must run to find a block; thus, it will spend more electricity. ASICs differ in their energy efficiencies, and in the chart, we have used the Antminer S19, a relatively energy-efficient model.The Antminer S19 currently requires 181 MWh to mine one bitcoin. This is down 11% from 204 MWh in May when the difficulty sat at an all-time high.The hashrate has plummeted lately as American miners turned off their machines for significant periods over the past two weeks as electricity prices soared due to a heatwave. In addition to simply reacting to prices, many miners participate in demand response programs that require them to power down their machines when electricity is scarce.The recent difficulty reductions are highly welcomed by the miners struggling with profitability due to a combination of high difficulty, rising electricity prices, and depressed bitcoin price.In a blog post published three weeks ago, we warned that some public miners might be in danger of bankruptcy. The falling mining difficulty combined with the rising bitcoin price should give these companies some breathing room.
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