Mining difficulty falls by a record 27%. How will it affect Bitcoin?
At the end of June, China banned cryptocurrency mining in the Sichuan province, which accounted for 15% of the world’s hashrate. The rise in repression led to the shutdown of the biggest mining pools, while Bitcoin’s hashing power has been reduced by over half from May’s highs. The drop-off in the hashing power has caused the Bitcoin block time to increase to 23 minutes. The system’s self-regulation suggests that a new block should be added within 10 minutes. On 3 July, the mining difficulty was readjusted after having fallen by a record 27%.
Primarily North American miners have benefited from the situation in China. According to data from Compass, Inc., the remaining participants will see a 35% increase in profitability. Moreover, that may continue for 15 months as Chinese miners relocate their mining farms and no new ASICs hit the market. Marathon Digital alone, for example, plans to deploy an additional 100,000 ASICs by the start of 2022, elevating its hashing power to 12 EH/s or 15% of the current network hashrate.
The only thing that could pour cold water on mining companies’ boom is a continuation of Bitcoin’s downtrend.
Investment manager Timothy Peterson has pointed to the link between the price and hashrate, warning that the price of bitcoin may continue to correct until 31 October.
However, a fast hashrate recovery could reduce the risks of continued downside retracement. The prime cost of mining stimulates the miners to grow their investment in mining and thus restore the overall network’s hashing power. Marathon Digital is far from the only company with plans to dominate the field, and the queues for ASICs from leading manufacturers are still numbering 6 months or longer.
The StormGain Analytics Group
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