Can Blockchain Mining Difficulty Growth Predict When Will Bitcoin Price Start a New Bull Run?
Can Mining Difficulty Growth Predict When Will Bitcoin Price Start a New Bull Run?
It is not easy to predict fluctuations in the virtual currency market. Cryptocurrencies can abruptly fluctuate every single day. Since the beginning of the current year, the crypto market is in a bear trend that does not seem to be close to an end. However, there is a chart that would allow investors to have a better idea when the next Bitcoin bull run could start.
This specific chart features Bitcoin’s price and its development in the last years. However, it also shows plots that indicate when the bitcoin mining difficulty growth turns negative.
Kevin Lu and Thejas Naval, of Element Digital Asset Management, said that it is important to understand how bitcoin difficulty growth works.
On the matter, they commented:
“Monitoring bitcoin difficulty growth is an important indicator of how close we are to the mining breakeven threshold and if we are going to experience a period where inefficient miners begin to leave the network.”
They also said that miners are leaving the network and that it can mean that a new bull run could soon start in the market. Although this is a real possibility, the bull market does not necessary has to start in the near future. As they explain, it might be necessary between 6 and 12 months with flat or negative difficulty growth for prices to change direction.
It is possible to see in the graphic that during this year, only two times we have seen difficulty growth to turn negative. In other bear markets, difficult growth went negative more than two times.
When this happens, it means that inefficient miners leave the network and raises the aggregate efficiency of remaining miners. In this way, it is possible for the market to have less selling pressure from crypto miners. In general, when difficulty growth turns negative, it does it when the market is generally bottoming.
Nevertheless, it is not possible to say that the market is bottoming or that a new bull run will start in the next weeks. But it allows investors to have an idea about what happened in the past and how it affected the network.