This year was the year of mining difficulty and hash rate. This is because despite Bitcoin’s downward trend, it continued to increase to hit an all-time high (ATH) (Bitcoin) price, according to data analyzed by CryptoSlate.
Mining difficulty refers to the likelihood that a miner will find the hash code required to mine one block. Hash rate, on the other hand, measures the computational power required to find a single hash code. Therefore, increasing mining difficulty increases hashrate and vice versa.
Hashrate and difficulty have increased exponentially since the beginning of the year. In the graph above, the pink line indicates hash rate and the turquoise line indicates mining difficulty.
The first ATH of the year in mining difficulty is Recorded It increased by 9.32% to reach 26.64 trillion on January 21st. Almost two weeks later he on February 18th, the difficulty spiked again. Recorded 27.97 trillion new ATH. Despite the falling Bitcoin price and market turmoil, hashrate and mining difficulty continued to increase at the same pace, recording a new ATH almost every few weeks. May 2022.
Both hash rate and difficulty declined for a short period from May to September. However, it remained above his year-to-date ATH level of 26.64 trillion. In September, the mining hash rate will increase to gain 60% reduction in 24 hours. continue to increase, Recorded New ATH levels for October 3ct. 5. This increase was followed by a 13.5% spike in mining difficulty on October 10th.
The last increase of the year was recorded on October 24, when Bitcoin mining difficulty rose another 3.4%, Recorded 36.84 trillion new ATH. The hashrate remains at 260 EH/s at the time of writing and has not yet responded to the increase in mining difficulty.
Reasons for Hashrate Rise
There is no single reason behind the increase in hashrate. Basically, hashrate increases as a result of increasing number of miners. Several reasons can be given when explaining the exponential growth in the number of miners.
One reason is that Ethereum (ethereum) The merge took place at the end of September.The merger will result in the Ethereum network switched Ethereum miners lost their jobs because they changed their Proof-of-Work system to a Proof-of-Stake system. Most Ethereum miners have likely switched to Bitcoin mining, which could have led to a significant increase in the number of Bitcoin miners.
In the 2021 bull market, the majority of Bitcoin miners have ordered new mining rigs to expand their business and are shipping now. As more mining rigs reach their destination, more rigs will plug in and start mining, increasing the number of miners in the network.
Additionally, due to the bear market, mining equipment older than 2019 lost Profitability When Bitcoin falls below the $22,600 limit.The industry is aware of this problem and is rolling up its sleeves. Develop Better mining rigs with more efficient chips. To make up for the loss of new generation mining equipment is being sold at affordable prices, the number of miners is also increasing and hash rates are soaring further.
These facts are just a few of the many factors that cause hash rate spikes. These factors are more like trends than his one-off events increasing the number of miners, so we have no way of knowing if the number of miners will increase enough to cause another spike in hashrate.
High hashrate result
Rising hash rates and mining difficulty will make Bitcoin mining more competitive and put more pressure on all miners. The particularly inefficient ones could not cope with the increased speed leaving the network.
In 2021, there is a trend among miners to go public to raise funds easily. Most of them expanded their businesses at the time with the funds they raised.But after a bear market started Most stocks fell 80% in May. There was a lot of talk about possible bankruptcy this fall.
The Miner Net Position Change data also show that miners have been selling at their most aggressive rates since September in the last two years. Miner Net Position Change shows his 30-day rate of change in the unspent supply of Bitcoin miners. The red part of the graph below shows miners selling out, and the green part shows token accumulation in miners’ accounts.
Barring the January 2021 bull market, miners continue to sell at their best rates since 2021. However, the current sellout rate is due to miners needing funds to continue their operations.
a study Compass Mining and Core Scientific are just two examples of mining companies in trouble. core scientific Had to sell 79% of Bitcoin reserves to pay debts compass mining was unable to pay its electricity bills and had to close one of its mining facilities.