Bitcoin mining difficulty drops for the first time in 5 months

Lumerin Protocol
Nov 29, 2021 · 4 min read

After 9 consecutive increases, mining difficulty has finally decreased. Let’s see why and how this latest change affects miners.

Bitcoin’s mining difficulty adjustment in numbers

After the adjustment, difficulty fell 1.49% from 22.67T to 22.34 and stopped a 9-epoch long growing streak since July.

Bitcoin mining difficulty (Source: Coin Metrics).

Why has difficulty dropped?

Why have some miners disconnected? Although it’s impossible to tell for sure, we can estimate it is due to a couple of reasons.

The first and most likely one is price action. BTC experienced a 10% dip that led it from $59K to $53K — a new monthly low.

Price is one of the most decisive factors of Bitcoin miners’ profitability. Miners saw their revenue drop 8.88%.

For many miners — especially those who don’t have access to low electricity prices — , that kind of move means mining is no longer profitable. Mining at a loss, these miners had to turn off their machines, leading to the drop in hashrate.

Bitcoin price and miners’ revenue in USD comparison (Source: Coin Metrics).

Secondly, there’s a technical reason. Last week, there were reports that many mining pools were undergoing connectivity issues, causing disruption and disconnection to miners.

According to CoinDesk, these issues were related to DNS “poisoning” and most likely due to the Chinese government interference on these pools’ operations, primarily located within the country’s territory.

The difficulty adjustment effects on profitability

If you’re new to mining, we invite you tor ead our article below to understand how miners make money:

Indeed, before the previous adjustment, hashprice was $0.37. However, in only two weeks, a series of factors considerably hit miners’ revenue, including:

  • Difficulty increase.
  • Bitcoin’s price drop.
  • Low transaction volume (less fees paid to miners).

These circumstances caused hashprice to drop roughly 20%, to $0.30 per hash per second.

Hashprice is a metric that determines the amount of money — in US dollars — miners earn for each hash per second.

Now, after this difficulty drop, miners recovered some of their lost profitability. Hashprice bounced on $0.30 and recovered 2 cents, which means a 7.6% rise.

Bitcoin miners’ revenue in USD (Source: Coin Metrics).

Closing thoughts

Media reports and press releases from large mining entities still refer to a growing interest in mining and hashrate.

Although only time will tell, it’s probable that this hiatus in hashrate’s growth is only circumstantial and affected by temporary factors.

We believe hashrate will quickly resume its upwards trend and surpass previous all-time highs, especially if bitcoin’s price does the same thing. If this happens, difficulty, of course, will follow.

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Lumerin Blog

An extensive library of newsworthy, analytical, and educational content regarding cryptocurrency and crypto mining. By Lumerin Protocol, built by Titan Mining.