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On-chain data shows the Bitcoin Difficulty is set to see a drop in the upcoming adjustment after having gone up the previous four times.
Bitcoin Difficulty Will Finally Provide A Break To Miners
The “Difficulty” refers to a feature present on the Bitcoin blockchain that defines how hard the miners would find it to mine a block. The network changes its Difficulty in automatic adjustments that occur about every two weeks.
This feature exists on the network to achieve one task: keep the block production rate stable around 10 mins per block. “Block production rate” here is the time that the miners take to mine a block of the cryptocurrency.
Miners on the BTC network perform their duty by leveraging computing power. As such, whenever they expand their facilities, they become faster at their task. But due to the Difficulty’s existence, this speed increase is only temporary.
Whenever the miners deviate from the standard block production rate, the network takes action in the next adjustment and changes the Difficulty just enough to bring the validators back to the usual pace. The adjustment can be both positive and negative, depending on whether the miners are performing their task at a faster or slower rate.
The next Bitcoin Difficulty adjustment is estimated to occur this Sunday, at around 1:30 AM UTC. Here are the details regarding this event, according to data from CoinWarz:
As is visible above, the average Bitcoin block time has stood at 10.50 minutes recently, which means the miners have been slower than required. To correct for this, the network is expected to decrease the Difficulty by nearly 5%.
During each of the last four adjustments, the chain raised the metric, so this upcoming decline would put an end to the streak. As mentioned before, the Difficulty is merely a reaction to what the miners are doing. Thus, these trends in the Difficulty can be traced back to the trend in the Hashrate, an indicator that measures the total amount of computing power employed by the miners.
Below is a chart from Blockchain.com that shows the data for the 7-day average of the Bitcoin Hashrate over the past year.
From the graph, it’s apparent that the 7-day average of the Bitcoin Hashrate was witnessing some sharp growth earlier, but its value has observed a plunge recently.
Whenever the Hashrate rises, things become harder for the individual miners. This is because of the fact that the Difficulty goes up whenever this happens, ensuring that any revenue increases due to higher computing power are nullified.
Thus, the same revenue is now competed for by a larger pool of computing power. Miners that can’t increase their individual power at the same rate as the network increase naturally fall behind the competition.
As such, it’s not uncommon to see the Hashrate cool down after a large jump in the Difficulty. The recent plunge in the metric may also have taken place because some miners could have been unable to cope with the multiple consecutive spikes in the Difficulty.
BTC Price
Bitcoin has furthered its recovery in the past day as its price has reached the $97,500 mark.
Featured image from Dall-E, Blockchain.com, CoinWarz.com, chart from TradingView.com
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