Bitcoin Mining Difficulty Hits New Heights in the Lead-up to Bitcoin Halving

Bitcoin mining difficulty, which measures how difficult it is to solve the Bitcoin network’s cryptographic problems that are tied to mining, passed 80 trillion in the last week. Bitcoin’s difficulty adjusts to ensure that block times can stay at a constant 10 minutes. A rising difficulty indicates increased computational power being deployed across the network. The last difficulty adjustment increased levels by ~6%.

A key factor in the surge in mining activity is the upcoming Bitcoin block reward halving. As a way to counteract inflation and devaluation, Bitcoin’s block reward for successfully mined blocks will halve from 6.25 coins to only 3.125 in April. While this may be exciting for investors, who expect the supply shock to drive forward price pressure, for miners the halving represents a significant drop in revenue.

From April, their reward for earning BTC will be cut in half. Unless the price of BTC doubles, they will be earning less than they did pre-halving. The current surge in mining might be miners deciding that the next two months are an opportunity to maximize BTC accumulation given higher block rewards. The rising price of BTC boosts this proposition.

The Bitcoin Hashrate Is Currently At An All-Time-High. Source: Coinwarz

According to research released in the last week by Galaxy Digital, 20% of the current miners could go offline after the Bitcoin halving. This is because only the most efficient operations will be able to survive in the post-halving environment. Analysts using data from Coinmetrics write, ”We estimate that roughly 15-20% of the network hashrate at the conclusion of 2023 (86-115 EH) could come offline at the time of the halving.” They make these estimations based on transaction fees being 15% of miner rewards and the price of BTC being US$45,000.

Additionally, Galaxy expects several older Bitcoin mining machines, including the extremely popular Bitmain S9, Canaan’s A1066, and MicroBT’s M32 models, will have to be shuttered post-halving.

Cryptocurrencies