Following a period of sustained bearish sentiment in the Bitcoin mining market accompanied by three notable hashrate reductions in the final third of 2018, the flagship cryptocurrency’s network appears to be back on its way to optimum health.
Bitcoin Reverses Hashrate Decline
In December, CCN.com reported that the flagship Bitcoin blockchain’s hashrate dropped by 7 percent over a single 24-hour period as miners turned off their rigs or exited the market altogether after being forced out by low prices and nonexistent margins. Some crypto bears even predicted that Bitcoin had entered a “death spiral.”
Now, however, Bitcoin’s difficulty target has been revised upward and is closer to where it was in early December, which indicates that miners are beginning to come back into the market. Data from Blockchain.com and DRIVE Insider shows that the network’s hashrate has gone up to 40,219,475,700 GH/s, which is close to where it was in early December. The news comes as a boost for Bitcoin holders who have resisted pressure to sell in the face of testing the $3,000 support level for much of December before eventually bouncing back up to around $3,600 currently.
Significance of Difficulty Adjustment
The difficulty adjustment mechanism exists to ensure that regardless of price movements, the Bitcoin network will always have adequate capacity to carry out transaction hashing using a dynamic system that eases difficulty when miner numbers go down and vice versa. As such, increased difficulty generally means that more miners are coming into the fray, which indicates that the crypto winter may be experiencing a mild thaw, at least in the mining space.
It is also key to remember that despite the much-publicised woes of the Bitcoin price in 2018, the network’s current hashrate is roughly three times more than at the same point in January 2018, with a difficulty approximately 2.5 times that of 12 months ago when it was coming off an all-time high. If Bitcoin is able to maintain its current price trajectory, 2019 might well turn out to be an interesting year for miners.
This is particularly so because after a disappointing year for many altcoins touted as “Bitcoin killers,” attention is once again turning to Bitcoin as the lodestar cryptocurrency which refuses to die, with developers looking to build on it rather than other networks.
Right now, it is still too early to say with any certainty that Bitcoin miners are coming back into the market in significant numbers because there is a slight lag between miner numbers and difficulty adjustments. Over the course of Q1, the difficulty target will present a fuller picture of the state of the mining space.
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Last modified: March 4, 2021 2:51 PM