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Bitcoin mining difficulty adjustment

Hashrate falls as BTC fails to break above $30K

Analyzing the effects of difficulty on Bitcoin mining profitability

The latest difficulty adjustment, effective at block height 737,856, reduced mining difficulty by 4.33%. 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 737,856, mined on May 25. Total hashrate at the time of the adjustment averaged 213.92 EH/s.

Hashrate was 4.37% lower than the 233.7 EH/s from the last change.

Source: Coin Metrics

As a result, difficulty fell 4.33% from 31.25T to 29.9T, almost erasing the increase of last adjustment. This represents the fourth difficulty drop of the year, and the largest one since July 2021.

This comes as no surprise when considering the latest price action. With BTC failing to break above the $30,000 resistance, miners with tighter profit margins and higher electricity costs have started to turn off their miners.

Source: Coin Metrics

Difficulty adjustment effects on Bitcoin mining profitability

Difficulty drops often bring a short period of relief to the remaining miners. This happens because mining becomes less competitive, therefore increasing revenue.

However, this time was different. The negative price action of the last few weeks — and the last days before the adjustment in particular — suppressed the positive effects that a difficulty decrease has on profitability.

Source: Coin Metrics

Hashprice fell a cent, from $0.13 to $0.12 — a 7.69% drop that set a new yearly low. These are the lowest revenue levels miners have had since December 2020. Additionally, daily miner revenue has dropped ~5M since the previous adjustment and is now sitting at a $25.08M average.

Implications of the latest difficulty adjustment

As profitability decreases, miners with tighter profit margins start to capitulate, having to turn off their miners to remain sustainable. As a result, reduced revenue driven by bitcoin price action usually leads to a hashrate drop. This seems to be the stage we’re in at the moment.

A recovery from bitcoin could quickly turn this situation upside down, incentivizing miners to resume operations and add their hashrate back to the network. However, BTC has failed every attempt to break out of its current range for weeks, so this scenario seems unlikely at least in the short term.

Furthermore, the mining community still expects a considerable amount of new miners to enter the network. Many mining corporations have plans to expand and grow their operations, which would bring hashrate back to new all-time highs.

Considering these factors, it’s probable that lower profitability will drive hashrate further down, and difficulty with it. This will continue to happen until reaching a point of balance between revenue and difficulty, or until bitcoin recovers bullish momentum.

TL;DR:

  • Difficulty adjustment block height: 737,856
  • Date of the adjustment: 05/25/2022
  • Average hashrate at the time of the adjustment: 213.92 EH/s
  • Previous difficulty: 31.25T
  • Current difficulty: 29.9T
  • Difficulty change: -4.37%
  • Miner revenue per hash per second (hashprice) after adjustment: $0.12

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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