Bitcoin mining difficulty drops for the first time in 5 months
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
The latest difficulty change occurred at block height 711,648, mined on Sunday, November 28. The hashrate at the time of the adjustment was 159.81 EH/s — 1.44% lower than the 162.15 EH/s from the previous difficulty change.
After the adjustment, difficulty fell 1.49% from 22.67T to 22.34 and stopped a 9-epoch long growing streak since July.
Why has difficulty dropped?
The Bitcoin protocol automatically adjusts difficulty according to the total hashrate mining on the network every 2,016 blocks — or 2 weeks approximately. Thus, this latest decrease means that there are fewer miners now than there were two weeks ago.
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.
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
After a tough couple of weeks, this decrease in difficulty comes as a breath of fresh air for miners.
If you’re new to mining, we invite you tor ead our article below to understand how miners make money:
Understanding Bitcoin mining revenue
How do miners get paid and what can affect mining profitability?
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.
Difficulty’s 5-month increasing streak has finally come to an end. The drop in difficulty gave miners — especially retail miners who pay higher electricity prices — a much-needed breather. Nevertheless, this shouldn’t be seen as a change of trend.
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.