Bitcoin Mining Difficulty Reaches All-Time High
Bitcoin (BTC) mining difficulty hit an all-time high of 127.6 trillion this week, indicating an increase in the network’s computing power. However, a decline is expected on August 9, with a drop of about 3% predicted to bring the difficulty down to 123.7 trillion, according to CoinWarz.
Currently, the average block time is around 10 minutes 20 seconds, slightly above the protocol's target of 10 minutes. Difficulty adjustments help restore this time by responding to changes in the total computing power (hashrate) allocated to mining.
According to CryptoQuant, mining difficulty had been declining throughout June, reaching a low of 116.9 trillion in early July. However, the situation reversed in late July, resuming a long-term upward trend associated with an increase in the number of miners.
Bitcoin's Sharply Rising Stock-to-Flow Ratio Points to Growing Shortage
Bitcoin mining difficulty measures how hard it is for miners to find the correct hash for the next block. It is adjusted every 2016 blocks — roughly every two weeks — to maintain a stable block time of about 10 minutes, regardless of changes in the network hashrate.
As difficulty increases, mining becomes more expensive and less profitable unless the price of BTC increases. On the other hand, decreasing difficulty provides temporary relief to miners, making it easier to earn rewards using the same hardware.
Mining difficulty and network hashrate are critical not only for security, but also for maintaining Bitcoin's stock-to-flow ratio , an important measure of scarcity. This ratio compares the current supply of an asset to the rate at which new supply enters the market.
A high stock-to-flow ratio indicates that new production has a minimal impact on overall supply, helping to maintain price stability. BTC currently has a stock-to-flow ratio higher than gold, making it “twice as scarce,” according to PlanB, an analyst who developed the stock-to-flow pricing model. With about 94% of the 21 million BTC supply already mined, Bitcoin’s stock-to-flow ratio is estimated at 120, compared to gold’s 60.
Silver, by contrast, has historically been demonetized in part because of its significantly lower stock-to-flow ratio. When silver prices rise, more supply enters the market, causing prices to fall — a phenomenon that Bitcoin is designed to counter.
Bitcoin's self-adjusting difficulty ensures stable block production and predictable supply
The Bitcoin protocol automatically adjusts the difficulty roughly every two weeks. When more miners join the network and the hash rate increases, mining becomes more difficult, slowing down block production until the difficulty is adjusted. The opposite happens when the hash rate drops — the difficulty decreases to keep the average interval between blocks close to 10 minutes.
This mechanism ensures predictability of BTC issuance and prevents sudden supply disruptions that could cause market volatility. By adjusting the difficulty according to available computing resources, the protocol maintains the inelasticity of assets to production — one of the key attributes underlying Bitcoin’s value as “digital gold.”
Bitcoin Falls as Kimchi Premium Returns
While mining difficulty braces for a potential decline, the price of Bitcoin remains under pressure. Bitcoin fell 3% to an intraday low of $112,680 before recovering slightly. By 7:30 PM ET, BTC was trading at $113,375. South Korea was trading at a premium again, at $113,987, 0.84% above the global average, and the kimchi premium returned after a nearly month-long absence.
This premium often indicates a rise in domestic demand or regulatory issues in certain regions. Despite the pullback, Bitcoin's market share remains at 61.4%.
Source: cryptonews.net
