As miners' profitability is squeezed, the hash price drops after a major difficulty adjustment increase.
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Bitcoin's most recent difficulty adjustment was 9.26%, which is the second highest increase in this year's history after January's 9.32%. The increase in difficulty is due to a rise in hashrate over the past two weeks, driving faster block production times. Both difficulty and hash rate are now at their lowest levels ever. The hash rate has increased by 10.27% in the past 30 days.
There are several factors that appear to have driven the hash rate rises over the past few weeks. Larger public miners are getting more plug-ins in line with their 2022 expansion plans. We're also moving past the hotter summer months in Texas, where miners temporarily shut down rigs as incentives under their purchase power agreements. Price rallying to $25,000 will bring more hash online, and less efficient rigs will shift to more competitive, efficient operations. Although it's hard to determine which factor is most important, all appear to play a part in hash rate growth.
Bitcoin mining is becoming more difficult due to an increase in the hash rate over two weeks
There are likely to be many factors that have influenced the Bitcoin hashrate in the past few weeks.
This rapid rise in difficulty is rare and seems less sustainable than the gradual increases in difficulty and hash rate we have seen in the past. The latest difficulty increase puts more pressure on miners profit margins, at a moment when we believe bitcoin price will continue to fall.
The hash price continues to fall since its golden period. It fell nearly 17% in the last 30 days. The hash rate rise is not due to a sustained increase in the margin of hashrate coming online, even though it is mainly driven by expansion plans prefinanced by major public miners.
The charts above show that even a short-term reversal doesn't alter the long-term trend, which is an ever-increasing network difficulty and hash rate.
The hash price continues to fall since its golden period. It is down almost 17% in the last 30 days.
Arcane Research's analysis showed that major public miners' base bitcoin production cost was between $6,000 and $10,000. This is based only on electricity prices. Read more about that research by clicking on the link above or reading "Bitcoin hash rate plummets 17% from all-time high" This would include general expenses, payroll, interest on outstanding loans, and other costs.
Even though we are assuming that the estimate is highly exaggerated because we don’t know the methodology or quality of the analysis, a bitcoin market price hovering around $20,000 puts major public miners in a position to make monetary profit on every bitcoin mined.
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By: Dylan LeClair,Sam Rule
Title: Bitcoin’s Rising Difficulty Squeezes Miner Profitability
Sourced From: bitcoinmagazine.com/markets/difficulty-hits-bitcoin-miner-profits
Published Date: Fri, 02 Sep 2022 00:30:00 GMT
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