Bitcoin Mining Difficulty Rises to New High; What Does This Signal Suggest?

Bitcoin mining difficulty has risen proportionally to Bitcoin's price since 2019, hitting a new high in 2024.

The average Bitcoin mining difficulty is currently 90.67, unchanged in the last 24 hours but up 73.16% from 52.36 over the past year. This record-high mining difficulty coincides with Bitcoin's recent price struggles.

Amid the skyrocketing difficulty, miners' profitability has crashed, with a meager $163.77 million in revenue generated over the past seven days.

How Bitcoin bTC's Performance Affects Mining Difficulty

Bitcoin mining difficulty estimates how hard it is to find a new block within the Bitcoin blockchain. It is measured in terahashes (T). The mining difficulty is around 62T, where 1 is the lowest difficulty level. This difficulty also changes after every 2,016 blocks mined approximately every two weeks.

Bitcoin's price strongly correlates with mining difficulty. When Bitcoin prices increase, more miners will participate in mining activities since the potential rewards will be higher.

The increased miners' participation will boost the network's total hash rate and increase mining difficulty. These changes ensure that miners can locate new blocks within every 10 minutes.

Some miners, especially those operating with expensive hardware, may go out of business when Bitcoin's price dips. Miners giving up on mining leads to a decline in the network's hash rate, which might result in a lower difficulty level.

In an August 6 X post, CryptoQuant's CEO Ki Young Ju noted that Bitcoin's hashrate is nearing a new all-time high. According to Ju, this increase in hash rate is bullish for Bitcoin, suggesting that miners' capitulation is almost over.

#Bitcoin On-chain Data Summary:

Bullish

Hashrate Recovery: Miner capitulation is nearly over, with hashrate nearing ATH. U.S. mining costs are ~$43K per BTC, so hashrate likely stable unless prices dip below this.

Whale Accumulation: Significant BTC inflows into custody...

- Ki Young Ju (@ki_young_ju) August 6, 2024

Notably, US mining costs are approximately $43,000 per BTC coin, with the hash rate currently at 581.41M, up 5.74% from yesterday's 549.85M. This figure represents a 37.89% increase in hash rates over the past year.

According to the founder of CryptoQuant, the hashrate will likely remain stable unless Bitcoin's price dips lower than the current level.

Miners Profitability Dips to Record Lows, However Bitcoin Remains Bullish

Meanwhile, the Miner hashprice, a mining profit metric, has dropped below $36 petahash per second (PH/S). Storage infrastructure company BlocksBridge Consulting reveals that this drop in mining profit is a record low.

According to the report, miners' hashprice is still around $36 PH/s despite Bitcoin's recovery from the August 5 slump. Most of the top public mining firms are struggling to profit from the current hashprices. Firms such as Core Scientific, MARA, and Riot show monthly mining costs of $60,000 or more per BTC.

Record Low Profits Push Miners to the Brink

Tough times as #bitcoin mining costs topped $60k in July.

Read more in #MinerWeekly for details and estimated $MARA, $RIOT, and $CORZ hashcosts in Q2:https://t.co/tHarpstOiL

- BlocksBridge Consulting (@BlocksBridge_) August 8, 2024

MARA's Q2 2024 earnings report reveals the firm recorded the highest overall mining cost in July.

The mining firms are exploring strategies to manage operational costs and remain afloat. Core Scientific adopts a 100% sell strategy, selling all its mined Bitcoin tokens to cover operational costs. Core Scientific reduces debt exposure by selling but must accept some losses to sell at current market prices.

On the other hand, Riot and MARA rely on loans to expand their operations, hoping for future BTC price appreciation and to realize gains.

According to the BlocksBridge report, each strategy the mining companies adopt comes with challenges and opportunities. BlocksBridge believes the higher mining costs would have a lesser impact on Riot and MARA since they plan to hold their BTC coins.

Meanwhile, another miner, CleanSpark, increased its Bitcoin holdings and sold only 2.4 BTC in July. CleanSpark's Bitcoin holdings increased by 567% in July compared to the 494 BTC mined last year. As of July 31, 2024, CleanSpark held 7,082 BTC.

NEWS: CLEANSPARK INCREASES BTC HOLDINGS, SELLS JUST 2.54 BITCOIN IN JULY

CleanSpark sold just 2.54 #Bitcoin in July, boosting its Bitcoin holdings by 567% compared to last year. The company's July 2024 report shows an average sale price of $62,000. CleanSpark mined 494 BTC in... pic.twitter.com/K4MHVlGCd8

- JAKE (@JakeGagain) August 3, 2024

This implies that selling pressure declined in the mining sector, with a 50% increase in miner revenue recorded in July.Overall, the rising mining difficulty likely signals further price increases for Bitcoin.

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