Bitcoin mining difficulty sees sudden drop

Bitcoin mining difficulty sees sudden drop

On Monday November 11 not only the price of bitcoin (BTC) dipped. The mining difficulty of the most dominant cryptocurrency plummeted as well. In fact, after dropping 7% on Monday, the difficulty of the original cryptocurrency hit its lowest point since December 2018. 

So what is mining difficulty? For those who do not know, mining difficulty is the required effort for miners to solve the mathematical equations needed to validate transactions on the Bitcoin network. The mining difficulty basically functions as a mechanism to ensure network security, even when the price of bitcoin drops or the network activity drops significantly for whatever reason. 

Image 1: the mining difficulty of Bitcoin in one year (source Blockchain.com)

As you can see in the image above, the mining difficulty has been on a rise since December 2018 and just recently dropped significantly. The data from Blockchain.com shows that a bottom was found in December 2018 of approximately 5.1 trillion and then rose to an all-time-high (ATH) of almost 13.7 trillion in October 2019. On November 11 the difficulty dropped to a little over 12.7 trillion. 

Hash rate

While the difficulty of Bitcoin mining dropped, the hash rate was actually on a rise. The image below shows that the hash rate, which is an estimated figure of the computing power that is dedicated to the validation of transactions, exceeded the 100 quintillion hashes per seconds again.

Image 2: the hash rate of Bitcoin in one year (source Blockchain.com)

The latest developments, when it comes to mining difficulty and hash rate, do not seem to bother mining companies. In recent news, Bitcoin mining provider Argo Blockchain activated 500 new miners and plans to install another whopping 10.000 extra miners by the end of Q1 2020. In the meantime, Bitmain is progressing with the expansion of the Texas facility, which could become the largest mining facility in the world. These developments show that mining companies remain positive about the future profitability of the sector. 

Bitcoin price

The next 2016 blocks will be mined with the new difficulty. That is, until a new adjustment in difficulty happens. According to a Dutch cryptocurrency expert, who goes by the name of PlanB on Twitter, the drop in difficulty and rise in hash rate is not necessarily bad news for the BTC price. In fact, he argues that bitcoin will become “very bullish” if the next difficulty adjustments will be a positive. PlanB says that a positive adjustment is quite likely, given that the hash rate passed the 100 quintillion hashes per seconds again.