Bitcoin mining has become less difficult amid the recent decline in cryptocurrency markets, although industry experts believe the situation is unlikely to last.
Network difficulty fell Sunday from more than $114 trillion to $110.5 trillion, according to data provider CoinWarz . The decline came as Bitcoin's price has fallen significantly . On Wednesday afternoon, BTC traded below $83,000 for the first time since early November, according to data from CoinGecko.
Reducing mining difficulty during bear markets is considered common. When prices fall and demand for assets declines, some companies may reduce their mining capacity by turning off devices to save energy. The latest reduction also coincides with severe winter weather in parts of the United States, which has led to higher energy prices.
When markets are booming, the mining network expands, increasing the difficulty. Difficulty has increased significantly over Bitcoin’s 16 years of existence, as the growing network requires more computing power and energy. This metric is important because its increase indicates that the network is becoming more secure.
“Energy in the U.S. is getting more expensive due to winter conditions,” Nick Hansen, CEO and co-founder of mining pool Luxor, told Decrypt . “The demand for electricity is increasing, which is driving up [mining] prices.”
He added that “a combination of higher overall electricity costs and lower overall prices” had led some mining companies to cut back on operations more than usual.
Bitcoin Mining Reset
Curtis Harris, senior director of development at mining services company Compass Mining, said the recent “minor pullback could signal a reset as miners adapt to” the Bitcoin drop “while navigating energy costs, infrastructure constraints, and slower adoption of new-generation hardware.”
Mining difficulty reached new records in January, when Bitcoin set a new price high of over $108,000.
Miners, the large industrial banks of computers that are rewarded in BTC for processing transactions on the blockchain, often rejoice in short-term difficulty reductions as transactions become easier and more profitable. The problem is that the price of BTC has plummeted, Ro Shirole, chief business officer at BlockMetrix, told Decrypt .
“The network reduction helps [miners], but the price drop is outpacing the network reduction percentage,” he added, noting that miners were only able to enjoy it for “about five minutes.”
Bitcoin's mining difficulty is adjusted after every 2,016 blocks. This happens on average every two weeks. A difficulty of 110.5 trillion means that mining the asset is now 110.5 trillion times harder than it was when the first block was mined in 2009.
However, the recent difficulty reduction is unlikely to last long, Scott Norris, CEO of independent Bitcoin miner Optiminer, told Decrypt , noting that operations in North America are expanding and therefore the network will grow.
“For now, miners may enjoy lower prices,” he said, “but prices will soon go up.”
Edited by James Rubin
Source: cryptonews.net
