Bitcoin mining difficulty saw a significant drop of 7.8% on June 5, 2024, reaching levels not seen since before the halving event in April. This is the largest difficulty drop since the collapse of the crypto exchange FTX in 2022. One analyst mentioned that miners’ daily revenues have decreased from $78 million before the halving to $26 million currently.
The recent downward adjustment in mining difficulty could be good news for smaller miners and could potentially lead to profits for mining farms. The decrease in power requirements to mine blocks by 7.8% over the weekend is a positive development for participants in the Bitcoin network.
Data from Coinwarz indicates that Bitcoin’s mining difficulty dropped from 83.6 terahash per second (TH/s) to 79.50 TH/s on June 5, similar to levels seen in March, just before the halving event in April. The mining difficulty is adjusted every two weeks based on the speed of block generation, ensuring that miners are operating at the right pace.
This significant drop in difficulty is comparable to the aftermath of the FTX collapse in 2022, which caused a more than 10% decline in bitcoin prices in just one week. The head of research at CryptoQuant, Julio Moreno, highlighted that the network hashrate experienced a 7.8% drawdown, impacting miners’ profitability as daily revenues decreased from $78 million to $26 million.
The decline in mining difficulty since early May has been a result of lower network hashrate, with some miners turning off their equipment due to reduced profitability. This downward adjustment in difficulty means a decrease in the network’s hashing power, creating opportunities for smaller miners and potentially generating profits for mining farms that were previously struggling to cover costs.
Miners play a crucial role in the Bitcoin network by using powerful computing systems to solve complex encryptions and validate transactions on the blockchain. Each block rewards miners with 6.25 BTC, which they often sell to sustain their operations. In June, miners were significant sellers of bitcoin, with over $1 billion worth of BTC sold over a two-week period when prices fluctuated between $65,000 and $70,000.
As Bitcoin’s hashrate and difficulty are expected to decline during the North American summer months, miners may find some relief from the intense competition that has been squeezing profits since the halving event. Despite the challenging environment, some of the most efficient mining machines remain profitable at current prices, hinting at a possible “local bottom” for BTC.
In conclusion, the recent drop in Bitcoin mining difficulty presents opportunities for miners, especially smaller operations, to enhance profitability and navigate the evolving landscape of the cryptocurrency market. The resilience of miners in adapting to changing conditions will be crucial in sustaining the network’s security and efficiency in the long run.