The latest mining difficulty adjustment for Bitcoin has seen the major cryptocurrency fall a staggering 16 percent — representing the largest fall in nine years. Its largest percentage decrease since the advent of ASIC mining machines in late 2012.
The mining difficulty is now back to levels last seen in June, which came after a big adjustment when the price of Bitcoin fell drastically in mid-March following the market fear over the Covid-19 pandemic. The adjustment marks the second-largest percentage decrease of all time.
The mining difficulty for Bitcoin has been on a tear-away for most of 2020 making the mining ecosystem quite a challenging one. This drop will mean there is opportunity in the next two weeks for less efficient miners to come back on and grab a decent profit.
Reasons for the drop?
While the price of Bitcoin and the health of the market is oftentimes linked to the mining ecosystem, there has not been any substantial drops in price to spark off a difficulty adjustment and fall in difficulty. Rather, one catalyst being pinned for this is that many mining companies in China’s Sichuan province are taking machines offline and relocating to cheaper energy sources after the end of the region’s rainy season, as CoinDesk previously reported.
Additionally, as Bitcoin’s price has increased significantly over the past few months and the amount of power needed to now mine new Bitcoins has decreased: “Margins for efficient miners will significantly widen,” explained John Lee Quigley, director of research at HASHR8. Further, “a myriad of inefficient miners will be able to mine profitably again,” he added.
This is still being seen as an odd occurrence as the decrease in mining difficulty is often surrounded by poor market conditions, but other factors are at play here. These factors may well make mining more desirable for the coming weeks which could again skyrocket the difficulty in upcoming adjustments.
A chance for a rally?
A lot is expected to happen in the coming weeks for the global markets, as well as Bitcoin. With the US presidential election happening, and many European global powers going into lockdown, there are a lot of indicators suggesting market turbulence.
The addition of a massive mining decrease on top of external market factors could lead to a positive rally for Bitcoin which is already hovering comfortably above the $13,000 mark. Many are still optimistic that Bitcoin could finish the year closer to it’s all time high of $20,000, and perhaps this week and contributing factors could be the catalyst for it.