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Bitcoin mining difficulty and profitability

Bitcoin hashrate recovers, driving mining difficulty to a new all-time high

Analyzing the effects of difficulty on Bitcoin mining profitability

The latest difficulty adjustment, effective at block height 733,824, increased mining difficulty by 5.56%. In this overview, we’ll analyze the effects on mining and profitability.

Bitcoin’s difficulty adjustment in numbers

The latest difficulty adjustment occurred at block height 733,824, mined on April 27. Total hashrate at the time of the adjustment averaged 213.1 EH/s.

Hashrate was 5.47% higher than the 202.03 EH/s from the last change.

Bitcoin mining difficulty (CoinMetrics).

As a result, difficulty rose 5.56% from 28.23T to 29.79T. This represents the second increase of the last five adjustments over the course of two months. As a result, Bitcoin has now set a new all-time high on two key network metrics: hashrate and mining difficulty.

Bitcoin total hashrate (CoinMetrics).

Difficulty adjustment effects on Bitcoin mining profitability

This increase in difficulty is particularly curious, as it happened during unfavorable price action on bitcoin, thus breaking with the usual norm of hashrate following price.

Although higher hashrate means a more secure network, mining profitability took a significant hit from this situation. Remember, the one factor that can counterbalance difficulty’s negative impact in profitability is price. However, this time, both price and difficulty acted in a way that hurts miners’ revenue.

Bitcoin miner revenue per hash per second, also known as hashprice (CoinMetrics).

As a consequence, hashprice dropped a cent, from $0.17 to $0.16, reaching levels unseen since December 2020 and setting a new yearly low. Additionally, daily miner revenue has dropped about ~3M since the adjustment and is now sitting at a $37.6M average.

Implications of the latest difficulty adjustment

The outstanding mining profitability that miners enjoyed throughout the whole 2021 is now distant in the past. More importantly, the decreasing profitability trend seems to be accelerating, led by hashrate and difficulty increases and bitcoin’s price inability to break out of the range it’s been in since the start of the year.

This trend isn’t ideal on the network’s decentralization, as it rules out miners with lower profit margins, who end up shutting down their ASICs due to their mining operation becoming financially unsustainable.

Of course, a recovery in bitcoin’s price could revert this situation very quickly, but until that happens, it’s unlikely that we’ll see this trend revert.

TL;DR:

  • Difficulty adjustment block height: 733,824
  • Date of the adjustment: 04/27/2022
  • Average hashrate at the time of the adjustment: 213.1 EH/s
  • Previous difficulty: 28.23T
  • Current difficulty: 29.79T
  • Difficulty change: +5.56%
  • Miner revenue per hash per second (hashprice) after adjustment: $0.16

About Titan

Titan provides powerful services for crypto mining at scale, including the first enterprise-grade mining pool. Titan is also the builder of the Lumerin Protocol, a peer-to-peer, open-source solution that makes crypto mining hashpower a tradable, liquid financial asset, unlocking mining profitability and providing greater access to capital.

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