Bitcoin (BTC) Difficulty Falls In Response To Dropping Blockchain Mining Activity
It is rare to see Bitcoin’s mining difficulty levels drop – if anything, they are designed to rise after every two weeks. However, these are extraordinary times for the cryptocurrency. The difficulty level is now set to drop even lower for the third consecutive time. The next adjustment will see Bitcoin difficulty levels drop by as much as 13%, the most significant drop since 2011.
What Is Behind The Drop?
There are several reasons behind the drop in Bitcoin difficulty levels. However, the main reason is the recent tumble in BTC prices.
Bitcoin miners get rewarded for their efforts in BTC. Falling BTC prices means that miners have to settle for less rewards, and this is just not sufficient for most miners. As such, more and more miners are laying their tools down as they plan to wait out the ongoing bear market. If the market lasts much longer, then mining may eventually become unprofitable for miners – this would only leave institutional miners with enough resources to sit it out as well as the conviction that BTC prices will rebound eventually.
The fact that there are fewer Bitcoin miners means that the network’s hashing rate is also lower. As such, there is not sufficient power to solve the algorithm that determines difficulty levels. As such, the only option is to lower difficulty levels.
Bitcoin Cash’s Role In All This
The dropping Bitcoin difficulty is a major development. However, it follows another major development: the forking of Bitcoin Cash.
The BCH network recently split into two chains that almost immediately started competing against each other. Craig Wright, one of the main figures behind the split, proposed selling off his network’s BTC for USD in order to fund operations. Considering that both networks have a lot of BTC in their possession, Wright’s threat to sell off his network’s BTC may have contributed to the tumbling prices and lack of confidence among investors.
There are also concerns that both chains may have consolidated their hash rates and redeployed them to mine coins on their new networks. This may have also contributed to the falling hash rates on the Bitcoin network and, consequently, a drop in difficulty levels. It is important to note that Bitcoin Cash held a considerable amount of hash rate power.
Looking To The Future
The present looks uncertain at the moment as the bear market is still in motion and is expected to last for several more months. However, analysts have good news for miners and investors alike: the future is bright.
For starters, history shows that a fall in mining difficulty levels is often followed by a rise in crypto-coins prices. Analysts also expected the pressure to sell to decline with time as the drop in difficulty level will lower mining expenses. This will also reduce mining pressure. Combined, these factors are expected to help BTC prices rebound.
Bitcoin mining difficulty is expected to fall significantly for the first time since 2011. This drop is caused by lower mining activity, which has been attributed to falling BTC prices owing to the ongoing bear market. The present is uncertain for now but the future seems bright.