Bitcoin miners are coming under pressure because of the crypto bear market, rising energy prices and the ever-increasing “difficulty” (the degree of difficulty to mine a block). While the Bitcoin price fell to new lows last week, mining key figures reached new record values.
The Bitcoin hashrate and the mining difficulty rose sharply in August 2022. The reason for this is that miners are joining the network again after a month-long sell–off in the crypto market – despite rising business costs.
The Bitcoin hashrate is an estimated value at which the computing power of the BTC network is mapped.
The mining difficulty shows how much work miners of the proof-of-work system have to invest in order to be able to add a new block to the BTC network. For the new block, the miners receive Bitcoin. In addition, the difficulty limits the number of Bitcoin that can be mined and thus the inflation of the cryptocurrency. A new block is created every 10 minutes.
Therefore, the Bitcoin hashrate and difficulty influence each other. For example, if the hashrate increases (because new miners join the network), then the time until a new block is created is shortened. After that, the difficulty is adjusted to extend the time until the mining of a new block.
Bitcoin Miners With Poor Equipment Could Capitulate
In August 2022, the difficulty rose to a new monthly high of 28.35 T (the number of hash targets required for a block) at the block height of 749,852. The difficulty is still 10% below the last year’s high (31.25 T) of May 2022.
The average block time much recently increased to 9.1 minutes. Therefore, the mining difficulty could soon increase again, so that the block time reaches 10 minutes again. That’s why, according to consultants of the Bitcoin mining consulting company Blocksbridge, the difficulty could soon increase by around 6.8%, reaching a new annual high or even a new all-time high. The mining difficulty is adjusted approximately every 2 weeks.
Blocksbridge explained that miners with old equipment could face massive problems due to rising energy costs. If the Bitcoin price falls, then the block earnings of the miners also decrease. Miners with inefficient mining computers (”mining rigs”) suffer the most from the current bear market.
Since the Bitcoin price has fallen by over 60% since the last all-time high of November 2022, miners have had to sell more BTC in recent months to cover their costs. Therefore, the computing power of the network and the Bitcoin hashrate also rose to a new all-time high this year. Currently, the hashrate is 246 exahash per second.
Mining costs increased by about 22% in the second quarter of this year. Miners could therefore be forced to sell mined Bitcoin. That, in turn, could increase the selling pressure in the market.
Some mining companies, such as Stronghold Digital Mining, even sold mining hardware to pay off debts.
Ethereum Miners Could Switch to BTC Network
With the Ethereum merge, the consensus mechanism of Ethereum is switched from proof-of-work to proof-of-stake. That is why mining will no longer be necessary for the validation of ETH transactions in the future.
Ethereum miners, who were partially able to get four times the stake for one block, may well switch to the Bitcoin network. According to rumors, a proof-of-work hard fork of Ethereum could also arise because of the Ethereum merger.
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