Bitcoin Mining Difficulty Drops 6 Percent Lowest Level Since December 2022

Bitcoin mining difficulty has declined, dropping by 5.63% to 83.15 trillion as of May 9, 2024. 

This adjustment marks the largest decrease since the bear market lows of December 2022. The difficulty reduction aligns with the period of the 2022 bear market, which saw a series of high-profile bankruptcies, including the collapse of Terra and FTX.

According to BTC.com, the decrease in difficulty follows a drop in the average hashrate over the past two weeks, from 630 EH/s to 595 EH/s. This reduction suggests that some mining operations have become unprofitable following the most recent Bitcoin halving, leading to the shutdown of equipment.

On April 20, the Bitcoin network underwent its fourth halving event, reducing the block reward from 6.25 BTC to 3.125 BTC. This event initially increased mining difficulty due to high transaction fees on the Bitcoin network. Despite the halving, miners’ revenue did not see a significant impact immediately because of these elevated fees.

However, by early May, Bitcoin miners’ daily revenue had dropped to levels seen in October 2023. Data from Blockchain.com indicates that total miner income fell to $26.38 million on May 3. The drop in revenue reflects the combined effects of reduced block rewards and a decline in transaction fees following the initial post-halving hype.

Trends in Hashrate and Hash Price

The adjustment on May 9 follows a 10% decrease in the network’s hashrate since the last difficulty adjustment on April 24. The hashrate fell from a seven-day moving average of 639.58 EH/s to 578.74 EH/s, indicating a substantial reduction in mining activity.

This decrease in hashrate has been accompanied by a decline in hash price, which hit an all-time low of less than $50 per PH/s per day on April 29. According to the latest data from CoinMarketCap, Bitcoin’s price has also fallen below $63,000, and it is currently trading at around $62,199. The hash price metric, coined by mining services firm Luxor, quantifies the expected earnings from a given amount of hash power, reflecting the profitability of mining operations.

BTC/USD 1-day price chart (Source: CoinMarketCap)

Future Projections and Miner Activity

The next adjustment in Bitcoin mining difficulty is projected to occur on May 23, with a predicted minimal drawdown of 0.19%. This slight adjustment may stabilize the network and ease some of the difficulties faced by miners following the halving.

Despite the recent challenges, Ki Young Ju, founder and CEO of CryptoQuant, has reported no signs of miner capitulation. He suggested that post-halving profit margins for miners could be maintained if Bitcoin’s price reaches around $80,000.

Bitcoin’s mining difficulty adjusts every 2016 blocks, approximately every two weeks, to ensure a consistent block discovery time of ten minutes on average. The automatic adjustment mechanism helps balance the network by responding to changes in the number of active miners.

Historical Context and Recent Developments

The recent 6% drop in mining difficulty is the most significant negative adjustment since December 6, 2022, when difficulty fell by 7%. At that time, Bitcoin was trading at around $17,000. Per Bitbo data, the current adjustment took place at block height 842,688, reducing the difficulty to 83.1 trillion.

Prior to the halving, the Bitcoin network experienced positive difficulty adjustments of 4% and 2%, driven by increased miner activity in anticipation of the reward reduction. These adjustments culminated in a peak hashrate of 650.29 EH/s on April 19. The subsequent decrease in hashrate reflects the economic pressures and shifting dynamics within the mining community post-halving.

The initial post-halving difficulty increase was partly attributed to the launch of the Runes protocol, a new fungible token standard for Bitcoin. Developed by Ordinals creator Casey Rodarmor, Runes offered a more efficient method for creating tokens on the Bitcoin network. This innovation drove up transaction fee revenue for miners temporarily, but the subsequent drop in average transaction fees from $128.45 to around $1 indicated a return to normalcy, according to Mempool data.