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Bitcoin mining difficulty adjustment

Bitcoin mining difficulty reaches new all-time high amidst falling price

The latest adjustment, effective at block height 719,712, increased mining difficulty by 9.32%. In this overview, we’ll analyze the effects this has on mining and profitability.

Photo by Jievani Weerasinghe on Unsplash

Bitcoin’s difficulty adjustment in numbers

The latest difficulty adjustment occurred at block height 719,712, mined on January 21. The hashrate at the time of the adjustment was 190.71 EH/s — an all-time high for difficulty adjustments.

Hashrate was 9.33% higher than the 174.42 EH/s from the previous difficulty change.

Bitcoin total hashrate (Source: Coin Metrics).

As a result, difficulty increased 9.32% from 24.37T to 26.64T.

This adjustment means Bitcoin mining difficulty has now achieved a new maximum. In other words, finding a block has never been more demanding, and the Bitcoin network has never been more secure.

More importantly, hashrate’s growth is a powerful sign of strength during the current negative price action.

New miners joining the network after an over 50% drop from all-time high shows their resilience and confidence in Bitcoin.

Bitcoin mining difficulty (Source: Coin Metrics).

Difficulty adjustment effects on profitability

Increasing difficulty often translates to reduced profitability for miners. The only exception happens when the price rises parallel to hashrate. This time, however, it was precisely the opposite.

Besides increasing difficulty, price action is also hurting mining revenue. The combination of harder-to-find blocks and dropping price means that miners have to spend more in power to earn less.

As a result, Bitcoin mining profitability has decreased significantly. Hashprice — the amount of US dollars miners make for each hash they produce per second — dropped to $0.17, and it’s now at its lowest point since December 2020.

Miner revenue per hash per second, or hashprice (Source: Coin Metrics).

Nevertheless, this isn’t surprising. Hashprice has always followed a downward trend due to the increasing hashrate and difficulty over the years. Only for brief periods when price outgrew hashrate — just like Q3 2021 — was the trend reversed.

However, hashprice tends to resume its decreasing path after a few months, which seems to be happening now.

Bitcoin price compared to total hashrate and hashprice (Source: Coin Metrics).

Closing thoughts

After having their best year in history, Bitcoin miners have had a rocky start of 2022. Difficulty all-time highs and strong retraces in price have led profitability to drop lower than it ever was in 2021.

Nevertheless, miners remain optimistic and keep showing great strength, pushing hashrate to new all-time highs in the middle of adverse price action.

On the other hand, the new heights we’re reaching in terms of difficulty and the reduced mining profitability resulting from it and the price drop make it very hard for domestic miners to turn a profit.

This situation is far from ideal, as Bitcoin needs new miners to improve decentralization further and avoid hashrate concentration in a reduced group of enterprise-level miner organizations and pools.

In that regard, we believe that the Lumerin Protocol will help mitigate that risk of centralization and unlock new opportunities to increase revenue, enabling small miners to become profitable.

Want to learn more about Lumerin? Visit our website here:

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

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Lumerin Protocol

Lumerin Protocol

Making crypto mining hashpower a tradeable commodity. Built by Titan Mining. Visit us on https://lumerin.io/.

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